The money system of most countries of the world is based on the central banking business model.
The business model exploits the fact that governments can extort money from the population in the form of taxes.
The private banks that make up the central bank have long recognised this unique power and realised governments had the potential to be their biggest and most reliable customer.
The other “asset” that a government has is the number of people it can exert force on legally.
Private banks be it high street, money-centre banks or the central bank itself, enable governments to take out huge loans which are in turn serviced by the population. In short, central banks allow the population of a country to become indebted and liable for loans taken out by politicians.
Taking the UK as an example. How much does the Bank of England (BOE) and other money centre banks make off government debt?
Government debt is around 1.4 trillion pounds, conservatively, which equates to a debt of 23,333 GBP per person in the UK, assuming a population of 60 million.
Interest payments are around 3% of GDP in 2013 and GDP is expected to be around 1.9 trillion pounds.
3% of 1.9 trillion is 57 billion pounds. 57 billion pounds spread between the 60 million people in the UK equates to 950 pounds per year. Every man woman and child in the UK pays 950 pounds a year in debt servicing on loans taken out by politicians.
In short, the central banking model is amazing.
It allows private central banks to make simply massive loans that only a government is able to afford.
And if the government runs into any difficulties, they can simply force the population to pay higher taxes to service the debt.
The real killer aspect of the central banking business model is that the loan repayments are indirect so the population does not identify the taxes as debt servicing.
The major problem from the point of view of governments is that they are trapped into keeping taxes high.
Central banks and the banks they represent are very reluctant for governments to cut their borrowing as it means less revenue for them.
And this in short is the central banking model.
It simply enables to largest banks to impose debt-servicing obligations onto people involuntarily.
It is genius in its simplicity and awesome in its profitability.