ABSTRACT
Central Banks are the historical descendants of powerful private banks, and as such they have inherited the natural desire to operate at the maximum profit. It was therefore logical that they should keep their earning assets at a maximum compatible with their reserves. The Central Bank is the creator of the cash upon which the credit structure of the country is built. It is used by the private banks as their own Bank at which they keep those reserves, realizable at any time in cash, which laws or prudence oblige them to hold against their liabilities. In countries where the gold standard is functioning freely, the Central Bank is obliged by law to give its notes in exchange for any amount of gold offered it at its statutory buying price, and to sell gold at the statutory price when any of its notes are presented to it for payment.
