Capital in the Twenty-First Century

by Thomas Piketty

Central banks are powerful because they can redistribute wealth very quickly and, in theory, as extensively as they wish. If necessary, a central bank can create as many billions as it wants in seconds and credit all that cash to the account of a company or government in need. In an emergency (such as a financial panic, war, or natural disaster), this ability to create money immediately in unlimited amounts is an invaluable attribute. No tax authority can move that quickly to levy a tax: it is necessary first to establish a taxable base, set rates, pass a law, collect the tax, forestall possible challenges, and so on. If this were the only way to resolve a financial crisis, all the banks in the world would already be bankrupt. Rapid execution is the principal strength of the monetary authorities.