With the exception of just a small handful of countries (Andorra, Panama, Monaco etc.), civilians will have grown up under the economic influence of a central bank. An organisation which in effect, takes full national control of money, currency and economic affairs, it has become a staple for most. Working alongside the government, the organisation takes the bulk of responsibility for finances within a country and very few countries work without one.
Importantly, in order to keep up with the modern working system, it deals with cryptocurrencies, having the ability to take control of the management and distribution of digital currencies and it is something that is being increasingly tested amongst many countries central banks.
Having said that, there are instances of nations who do not use a central banking system and henceforth there is certainly a case to be heard when it comes to whether it is necessary to have one or whether countries can work without it.
It is generally understood by the public that monetary issues are highly sensitive and thus it is the only feasible solution to pass responsibility for managing this onto groups of highly skilled, trained bankers and frankly, this is not something that is often questioned or considered. Quite simply. the cogs are turned quietly and the public often remain unaware of what this means for their nation. Therefore, it bodes the question, do you need a central bank and how can a country work without one?
Pros of the Central Bank
- It is a nationalised and recognised system that is adopted by most therefore it is generally understood to be an effective and stable system. People do not like change, so why change a recognised system?
- It allows the control of inflation, interest rates and other such monetary by those who are trained to best understand it.
- Greater control of regional banks through internal audits. This ensure that banks are following the best established practices and henceforth can provide the best services for the many.
- In regards to digital currency, it is generally understood that it boosts economic growth.
- It also contributes to lowering transaction costs.
Cons of the Central Bank
- Set up costs for the implementation of cryptocurrency amongst central banks is high. In effect, it involves the implementation of an entirely new type of money, and this money has to be created.
- Potential problems with financial privacy for citizens. It would allow for increased ability to monitor transactions thus decreasing privacy for many.
- Debt, debt, debt. It is no secret that since the influence of the central banking system has increased, so has debt which bodes the question, is the system effective?
- It represents the governments control of a persons finances, something which many feel is unfair and completely impeaches upon their freedom.
There are of course, many reasons why central banks do not always work and there is evidence to suggest that a country can, and in the case of a few, survive without the need for it. However, it is generally understood to be the case that alternative ways of managing finances within a country pale in comparison to the central banking system and therefore while a country can work without it, it potentially would not work as well than it would with it.