Wall St’s beginning was wealthy people lending to the government to fund war campaigns. This lending in the for of bonds has thousands of years of tradition.
It isn’t difficult to understand today that a standard measure of value like the Dollar doesn’t have to be centrally controlled. There was a time when a physical quantity of gold was used as a standard measure of value. People would deposit their gold at an independent local bank vault and get a receipt that circulates like paper cash Dollar.
So each local bank essentially had different forms of cash that could only be redeemed for gold at the local bank. Banks didn’t have multiple branches in different locations. (Reference the book Fragile By Design.) The legalization of bank branches and the central bank created the standard Dollar receipt we are accustomed to today.
There is a total stock of Dollars in existence at any point in time. The ratio of Dollars people are willing to exchange for things establishes prices. For example the floating price of gold since the Dollar became a standard measure of value separate from an ounce of physical gold in 1971.
The stock of Dollars constantly increases because the central bank and commercial banks intentionally create more credit on behalf of the collective that uses Dollars. The central bank creates Dollars to buy government debt thus allowing Congress to centrally determine how Dollars should be cast ostensibly on behalf of their constituents. In the 2008 crisis the central bank bought mortgages also. Commercial banks create Dollars to buy all kinds of bonds in the Wall St. bond market. The total stock of Dollars in existence increases because more bonds are bought with newly created money than existing bonds (that were bought with newly created money) have their principal repaid.
Price inflation occurs where newly created Dollars bid prices higher. As I stated, newly created money is cast buying bonds which results in higher bond prices. (Bond price inflation then causes lower interest rates on bonds.) This is why those who own bonds get richer. When too large a proportion of his or her wealth is in bonds he or she sells bonds on Wall St. and buys stocks thus trickling the newly created money into stock price inflation. Occasionally, people may sell Wall St. stocks and bonds to bid house prices higher or even to buy everyday things on Main St. thus bidding prices and wages higher.
Banks creates new money on behalf of the collective and by legal regulation chronically determines that the bonds in the bond market should be supported with newly created money. From there it trickles down to companies and individuals. This is wonderful for those who currently have wealth via bond ownership. It is obviously dependent on each individuals differing level of bond ownership.
The government has laws that require banks to behave this way. This is the current standard for our market system. New money is created and literally given to owners of bonds which trickles to owners of stocks. All this is true independent of discussion of interest on bonds or dividends on stocks. Or even, income taxes, sales taxes, VAT, or property taxes.
The glaring problem with this is that there is little clarity regarding how quickly or in which direction the total stock of money will change over time. It floats based on arbitrary ancillary ideas such as employment levels and the price of a basket of common consumer items. Meanwhile, the population that uses this money is commonly growing (rather than shrinking) at an unpredictable rate as well.
These issues aside it is glaringly obvious that the Dollar system supports centralized control of the government, stock market companies and the Main St. market as well as the individuals influenced by them via the bond market. The organizations that get newly created money lent to them have money to spend which keeps the economy circulating the way those organizations leaders see fit. This is top trickle down socialism in which the means of production are determined by collective ownership of companies via stocks and by government regulations.
Centralized control of credit via a monopoly on money was a essential point of the 1848 Communist Manifesto. The worldwide central banks of today are the existing embodiment of this foundational plank of Soviet society. Amd, while it is good to have a standard form of credit that is ubiquitously understood by us all, a system that only give credit to bond owners violates Republican ideals.