A central bank, reserve bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing money supply in the nation, and usually also prints the national currency, the nation’s legal tender.
The earliest semblance (appearance) of a bank controlling money in a country was created in the Song Dynasty in China. It was the first to issue generally circulating paper currency. The Yuan Dynasty was the first to use notes as the predominant circulating medium. The medieval (of the Middle Ages – from the 5th to the 15th century) European Knights Templar ran an early prototype of a central banking system, as their promises to pay were widely respected. Many believe this laid the basis for the modern banking system.
The European Central Bank (ECB) and the Federal Reserve of the United States are examples of a modern central bank. The primary function of a central bank is to manage the nation’s money supply (monetary policy), interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis.
The Bank of Amsterdam, established in 1609, is considered to be the forerunner to modern central banks.
The Bank of England, the model on which most modern central banks are based, was devised by Charles Montagu, 1st Earl of Halifax, in 1694.
The US Federal Reserve was created by the U.S. Congress through the passing of The Federal Reserve Act in the Senate and its signing by President Woodrow Wilson on December 23, 1913. Australia followed in 1920, Colombia, 1923, Mexico and Chile, 1925 and Canada and New Zealand, following the Great Depression, 1934, and Brazil in 1965. African and Asian nations established central banks after independence. Liberia established the National Bank of Liberia in the 1970s and its Central Bank in 1979.
The People’s Bank of China became the country’s Central Bank in 2000 after the adoption of a generally capitalist approach to its export economy.
Central banks usually also have supervisory powers, in order to prevent bank runs and to reduce the risk of commercial banks and other financial institutions engaging in reckless or fraudulent behavior. Central banks in most developed nations are institutionally designed to be independent from political interference. Still, limited control by the executive and legislative bodies usually exists.
But NEVER in history has any Legislature or Congress been directly involved in minting (making) currency. They have neither the skill nor expertise for that; rather, it is economists and others versed in monetary matters that do.
So Liberian Senator Armah Zulu Jallah’s statement that the Legislature “made an error by allowing some of its constitutional functions to be taken over by the Central Bank” is nothing short of preposterous (absurd, laughable). Even more laughable was his assertion that the Legislature had “reserved the authority to print currency.”
Let us make it clear, however, that it is not the CBL’s designated responsibility to mint currency that irks (bothers) the Legislature. Had it been simply that, both Houses would not have gone so far as to attempt punishing the CBL Governor and his Board of Directors and staff by banning them from contesting the forthcoming elections. No, it was the CBL’s empowerment of impoverished Liberians, who otherwise had absolutely NO access to credit, that terribly bothered the Legislators. Why? They reckoned that by reaching out to what Jesus called “the least of these, my brethren,” something without historical precedence, CBL Governor Mills Jones, his Board and staff had gained tremendous political capital, making every Senator and Representative nervous. Hence the unanimous vote in the Senate, and the overwhelming concurrence in the House to bar anyone from the CBL from contesting in the forthcoming elections.
What these Legislators do not realize is that the Central Bank has the authority to improve and stabilize the Liberian economy and make credit democratically accessible. In a country ravaged by fratricidal strife because of POVERTY, what better way to stabilize economy than by reaching out to the poor and underprivileged, in a deliberate attempt to bring them into the money economy. Who else can do that except that body created and authorized to manage the nation’s money?
This is aside from the REALITY ON THE GROUND: THE LIBERIAN ECONOMY IS DOMINATED BY FOREIGNERS, DUE CHIEFLY TO THE LACK OF CREDIT AMONG LIBERIAN NATIONALS.
That is why the Daily Observer has asked, ON WHOSE BEHALF IS THE SENATE ACTING?
The answer is clear: they are acting–so they think–on their own behalf because they fear political competition; and also on behalf of foreign interests whose financial support would be GUARANTEED if the Legislators maintain the status quo: the continued foreign domination of the Liberian economy and Liberia itself.
Fortunately, the people are already shouting their disapproval and rejection. So far, the Daily Observer has published statements from at least eleven groups who have already spoken out against the bill: the Liberian National Student Union (LINSU), the Liberian Electoral College, the Motorcyclists Union, the Concerned Students Movement of Liberia, Progressive Students Alliance of Liberia, the Patriotic Intellectuals of Liberia, the Movement for Justice in Liberia, Consortium of Intellectuals in Liberia, and the Criminal Justice Student Association, the Rural Dwellers Consciousness Movement of Liberia and the Liberia Labor Congress have spoken, as well as constitutional lawyer TiawonGongloe. It is also our understanding that student unions from every major university across the countryhave also spoken out against this bill.
Fellow Liberians, the die is cast. We must peacefully but forcefully resist the tyranny of the Legislature. If we do not, they will continue to arrogate unto themselves more and more power, paving the way for a violent eruption of anger and frustration.
We call upon the President of Liberia, Madam Ellen Johnson Sirleaf, to without hesitation veto this bill.
We also call upon the Supreme Court, to use the “power of judicial review” given it by Chapter 1, Article 2 of the Constitution of Liberia, “to declare any inconsistent laws unconstitutional”.