The establishment of central banks perpetuates an inflationary loop.

1. Politicians buy votes while making fantastical promises of social welfare benefits funded by taxes and moneyprinting. The highest spending promises will typically win the most votes.

2. Governments sell debt (gov't bonds) to finance these expensive policies. Central banks and regular banks buy the government bonds with money created ex nihilio; from nothing.

3. As the government spends this newly created money, the monetary supply expands; inflation worsens.

4. Voters struggle with increasing prices due to inflation and can be predicted to vote for more government moneyprinting and spending. The loop returns to point 1.

A secondary form of inflation is caused by the Mandrake Mechanism.

Every time a bank loan is granted, new money is created by the bank from thin air. This newly created money flows into assets such as real estate, stocks, commodities, etc.

This process leads to an increase in house prices. Later when the assets are sold on the market, the newly created money enters the greater economy and the monetary supply expands; inflation worsens.

The speed of this loan-based inflation is set by the repo rate. When the central bank lowers the repo rate, loans become more attractive to lenders and thereby more money is printed into existence.

When the repo rate is set high, loans are expensive and the rate of inflation is temporarily reduced.

Keynes noted in 1919 that the establishment of central banks would lead to the destruction of capitalism; i.e. the abolishment of free markets.

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Central banks will gradually rig the market, together with government, with false signals, distorting the supply and demand from regular market participants.

The result is a gradually impoverished population, impacted by a worsening burden of inflation year by year.

In the West, this process has solidified a powerful social-democrat voting block with few potential challengers, a form of uniparty structure.

In Sweden, the social democrats ruled without pause for half a century, until 1974, which gives a clue to the power of the inflationary voting loop.