Chapter 73: The One Who Brought the Bank of England to Its Knees (1)
As everyone knows, a central bank is very different from an ordinary bank.
The most famous metaphor is “the bank of banks.” A central bank lends money to banks.
Isn’t that obvious?
Money doesn’t just pop out of thin air. Someone who can print money has to actually print it and then lend it out at a fixed interest rate—only then does money exist in the market.
A central bank lends to commercial banks at a certain interest rate, and this is called the base interest rate. And of course... in order to make a profit, the banks lend at higher rates.
This is why even a small raise in the base interest rate can shake the economy.
That much is basic economic knowledge.
One of the key traits of a central bank is that it’s independent from the executive branch and seeks sustainable economic development.
If the government could freely print money and decide currency policies, then—because democratic governments have limited terms—they could flood the market with money without caring about the consequences. That’s why most central banks also hold the right to issue currency.
But that brings up this line of thought:
–Isn’t it kind of weird that Kim Hae-ik, making a rare appearance again, used to skip over the Bank of Korea and pretty much run the Korean economy by himself back in the day? Is it really okay for a vice minister-level official, part of the executive branch, to have that much power?
Hmm.