Originally Posted by Llewellyn H. Rockwell, Jr.

The state has no wealth that is its own. It is not a profitable enterprise. Everything it possesses it must take from society in a zero-sum game. That usually means taxes, but taxes annoy people. They can destabilize the state and threaten its legitimacy. They inspire anger, revolt, and even revolution. Rather than risk that result, the state from the Middle Ages to the dawn of the central banking age was somewhat cautious in its global ambitions simply because it was cautious in its need to steal openly and directly from the people in order to pay its bills.

To be sure, it doesn't require a central bank for a state to choose inflation over taxes as a means of funding itself. All it really requires is a monopoly on the production of money. Once acquired, the monopoly on money production leads to a systematic process of depreciating the currency, whether by coin clipping or debasement or the introduction of paper money, which can then be printed without limit. The central bank assists in this process in a critical sense: it cartelizes the banking system as the essential conduit by which money is lent to the public and to the government itself. The banking system thereby becomes a primary funding agency to the state, and, in exchange for its services, the banking system is guaranteed against insolvency and business failure as it profits from inflation. If the goal of the state is the complete monopolization of money under an infinitely flexible paper-money system, there is no better path for the state than the creation of a central bank. This is the greatest achievement for the victory of power over liberty.