There is a wide spread belief that it was the private banking sector that caused the current economic crisis. “Greedy” private bankers destabilized the economy, as socialists put it. At the same time, there are many conspiracy theories about central banks around. According to these theories, central banks are controlled by “dark” forces, and these forces caused the crisis of 2008.
As a result, most people without a background in economics are very confused. However reality is much simpler than it seems to be. The purpose of this essay is to explain why the crisis of 2008 has nothing to do with the private banking sector, and also explain the role that central banks play in the economy. This document, together with “The Socialist Myth of Economic Bubbles”, should give the reader a good understanding of the current crisis, and why this crisis was the result of the wrong government policies in Europe, U.S.A. and China.
This essay follows the tradition of the great Austrian economists, like Ludwig von Mises, F. A. Hayek and Murray Rothbard. No prior economic knowledge is required on behalf of the reader. A genuine interest on the subject will suffice.
