Introduction

The textbook definition of a central bank is a banking institution that is given a monopoly on lending money to the government in its respective currency. In the United States, this is the Federal Reserve. While central banks vary from country to country, they usually entail a few key characteristics.
  • A monopoly on lending money to the government in its respective currency.
  • Some level of power to regulate the private banking sector.
  • The power to set interest rates via manipulation of the money supply.
  • The duty of "lender of last resort" in the case of an economic collapse.

Libertarian Opposition to Central Banking

Libertarian opposition of the Federal Reserve is rooted in a deeper opposition to central banking in general. One may note that the nature of central banking has been put forth very clearly by both libertarian thinkers and authoritarians. For example, Thomas Jefferson, an advocate of limited government, wrote of central banking:
  • “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow banks to control the issue of their currency, the banks and corporations that will grow up will deprive the people of all property until their children wake-up homeless.”[1]

Meanwhile, Karl Marx, who advocated for everything to be brought under state control, wrote on the same topic:

  • “(To achieve total State control), centralize credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly…this cannot be effected except by means of despotic inroads on the rights of property.”[2]

The Austrian School

The Austrian School of Economics has historically been opposed to central banking. Ludwig von Mises, a key developer of Austrian business cycle theory, wrote a great deal on the topic, arguing that central banks are instrumental in bringing about recessions and depressions. For example, he wrote in Omnipotent Government:
  • "True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression."[3]


  1. ^ "Jefferson on Politics & Government: Money & Banking." University of Virginia Library. Web. 11 Apr. 2010. <http://etext.virginia.edu/jefferson/quotations/jeff1325.htm>.
  2. ^ Marx, Karl. "II -- Proletarians and Communists." Manifesto of the Communist Party. Australian National University. Web. <http://www.anu.edu.au/polsci/marx/classics/manifesto.html>.
  3. ^ Von Mises, Ludwig. Omnipotent Government: The Rise of the Total State and Total War. Ed. Bettina Bien. Greaves. Indianapolis, Ind.: Liberty Fund, 2009. Print.