Why is it stipulated that the central bank belongs to the state?
Gu Junzhuo
The US case vividly illustrates how important it is for the central bank to belong to the state. The Federal Reserve Board of the United States is composed of private institutions that exercise the functions of a central bank. The monetary policies it formulates and implements are not primarily for the benefit of the nation, but rather for the benefit of its affiliated commercial banks.
First, commercial banks are obligated to place reserves with the central bank; however, the Federal Reserve pays interest on these reserves, which is extremely unreasonable. The profits generated by the Federal Reserve's Treasury assets cannot cover the interest payments, effectively transferring public funds to private individuals. This inevitably expands the scale of US debt. In 2008, the Federal Reserve persuaded Congress to pass the Emergency Economic Stabilization Act. After the implementation of this policy, US national debt experienced a parabolic, explosive growth. Since the implementation of interest payments on reserves in 2008, the total amount of US national debt has soared from approximately $10 trillion to over $40 trillion. This not only increased fiscal overdraft but also indirectly increased the national debt burden.
Second, when commercial banks face defaults due to reckless expansion, the Federal Reserve will activate its emergency privileges. Commercial banks pledged heavily depreciated government bonds to the Federal Reserve at face value (100 cents) in exchange for a full injection of base money. This "face value bailout" essentially used the principal wealth of the central bank's currency issuance to pay for commercial banks' investment losses, effectively transferring public money principal to commercial banks.
Third, the US bailout practices during the financial crisis, from another perspective, encouraged financial institutions to create crises. The US bailout practices during the 2008 financial crisis and the 2023 Silicon Valley banking crisis actually sent a very dangerous signal to the entire financial system: risk is borne by the whole society, while profits are privately held by financial institutions. Financial institutions are always in a win-win position in creating crises. The US financial system even has a profit motive to deliberately create crises and expand the scale of national debt.
Fourth, the massive scale of speculation by US financial institutions was a major cause of the financial crisis. Before 2008, top investment banks like Lehman Brothers and Bear Stearns had leverage ratios as high as 30:1 or even 40:1. This means that a bank with only $1 of principal can borrow $30-40 to speculate in the market. Under such leverage, if asset prices fall by less than 3%, the bank's principal will be wiped out instantly, leading to bankruptcy.
Fifth, individuals in the US can issue currency, such as the so-called digital currency issued by President Trump. However, privately issued digital currencies have no wealth guarantee or sovereign credit guarantee; they are purely digital numbers in a computer. Therefore, the issuance of digital currencies is a complete scam.
Sixth, the US healthcare and insurance system consumes 18% of total wealth resources, far higher than the 10% in other democracies. The privatization of the central bank cannot be ruled out as a contributing factor. Ultimately, the burden of the US national budget falls on the people, resulting in a heavy burden on the American lower class. This explains why there are so many homeless people in the US.
August 1, 2026
Gu Junzhuo
The US case vividly illustrates how important it is for the central bank to belong to the state. The Federal Reserve Board of the United States is composed of private institutions that exercise the functions of a central bank. The monetary policies it formulates and implements are not primarily for the benefit of the nation, but rather for the benefit of its affiliated commercial banks.
First, commercial banks are obligated to place reserves with the central bank; however, the Federal Reserve pays interest on these reserves, which is extremely unreasonable. The profits generated by the Federal Reserve's Treasury assets cannot cover the interest payments, effectively transferring public funds to private individuals. This inevitably expands the scale of US debt. In 2008, the Federal Reserve persuaded Congress to pass the Emergency Economic Stabilization Act. After the implementation of this policy, US national debt experienced a parabolic, explosive growth. Since the implementation of interest payments on reserves in 2008, the total amount of US national debt has soared from approximately $10 trillion to over $40 trillion. This not only increased fiscal overdraft but also indirectly increased the national debt burden.
Second, when commercial banks face defaults due to reckless expansion, the Federal Reserve will activate its emergency privileges. Commercial banks pledged heavily depreciated government bonds to the Federal Reserve at face value (100 cents) in exchange for a full injection of base money. This "face value bailout" essentially used the principal wealth of the central bank's currency issuance to pay for commercial banks' investment losses, effectively transferring public money principal to commercial banks.
Third, the US bailout practices during the financial crisis, from another perspective, encouraged financial institutions to create crises. The US bailout practices during the 2008 financial crisis and the 2023 Silicon Valley banking crisis actually sent a very dangerous signal to the entire financial system: risk is borne by the whole society, while profits are privately held by financial institutions. Financial institutions are always in a win-win position in creating crises. The US financial system even has a profit motive to deliberately create crises and expand the scale of national debt.
Fourth, the massive scale of speculation by US financial institutions was a major cause of the financial crisis. Before 2008, top investment banks like Lehman Brothers and Bear Stearns had leverage ratios as high as 30:1 or even 40:1. This means that a bank with only $1 of principal can borrow $30-40 to speculate in the market. Under such leverage, if asset prices fall by less than 3%, the bank's principal will be wiped out instantly, leading to bankruptcy.
Fifth, individuals in the US can issue currency, such as the so-called digital currency issued by President Trump. However, privately issued digital currencies have no wealth guarantee or sovereign credit guarantee; they are purely digital numbers in a computer. Therefore, the issuance of digital currencies is a complete scam.
Sixth, the US healthcare and insurance system consumes 18% of total wealth resources, far higher than the 10% in other democracies. The privatization of the central bank cannot be ruled out as a contributing factor. Ultimately, the burden of the US national budget falls on the people, resulting in a heavy burden on the American lower class. This explains why there are so many homeless people in the US.
August 1, 2026