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The Failure of Central Banking with Matthew Mežinskis

Peter McCormack

Interview | Description | Timestamps | Show Notes

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The Failure of Central Banking with Matthew Mezinskis - WBD645 Peter McCormack

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Matthew Mežinskis is the creator of the Crypto Voices podcast and Porkopolis Economics website. In this interview, we discuss why free banking has always failed due to central bank interference, and how Bitcoin changes the rules of the game. We also talk about how credit is a natural economic phenomenon, and why narrow banking is centralising in nature.

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The history of free banking goes back over 1,000 years and it has existed in over 60 countries. It was widespread in the 19th century, but from the early 20th century onwards it was supplanted by central banking in modern economies. However, despite some common narratives, it’s demise was more to do with pressure from governments to create monopolies for currency issuance, than inherent weaknesses in the free banking system.

The idea of free banking is re-emerging as a response to the failures of central banks. It is well documented that monopolies often result in market failure due to their constraining of efficiency and innovation. Further, without competition, those running monopolies distort prices and capital through subjective and misaligned priorities. A sovereign debt spiral is a symptom of such centralising control.

Matthew Mežinskis is able to bring colour to this issue through his peerless analysis of the different types of money flowing through the economy, and how these are currently out of kilter with the economic system they are intended to support. At the root of the problem is that central banks control both the base money (i.e. the money supply) and the credit supplied to the economy through commercial banks.

These tools have been abused. Further, commercial banks have been allowed to get around the rules of the system for decades. As a result, bailouts for commercial banks are happening with alarming regularity. As Matthew asserts in the show: “In the last 100 years, the central bank, the premier banking institution in the United States, has gone to three extremes; [this] never ever has happened in recorded history.” Thank god we have Bitcoin.

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00:01:22: Introductions
00:04:23: Operation Choke Point 2.0, and free banking
00:08:49: Peak central banking, and progressive bitcoiners
00:13:26: Poland, Ukraine, and World War II
00:22:59: The importance of the state
00:28:40: Putin and Russia
00:47:09: A history of central banking vs free banking
00:54:14: Monopoly privilege
00:59:15: 100% reserve banking, and the narrow bank
01:13:54: Charting monetary base and reserve lending
01:27:58: A brief tangent on AI and ChatGPT's capabilities
01:33:38: Interest, QE, and QT
01:44:03: Discount rate vs Fed fund rate, and the repo market
01:54:41: History of the term "discount"
01:57:54: Should banks be allowed to fail?
02:03:10: Lightning, exchanges, and gold
02:16:23: Final comments

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