Chapter 233: The Small Central Bank

When a truck loaded with goods entered the construction site, Jim bid farewell to Madison, who was about to start busy work, and continued driving to the next location.

The HT store in the south!

Squatting by Highway 23, chewing on his taco, and watching the passing vehicles, Jim's mind was filled with mixed feelings.

On one hand, after witnessing these scenes, Jim truly admired Carter's capabilities. Compared to the business reputation he valued, Carter's local reputation was simply outstanding! As long as he didn't do anything foolish and stood against these people, his words would probably carry more weight in this area than the governor or the mayor.

A businessman who could conduct business like this was enough to earn Jim's admiration. And the way Carter was injecting money into the economy to stimulate growth showed a kind of responsibility rarely seen in big merchants.

But on the other hand, as Jim learned more, his concerns grew deeper.

Just like the law of conservation of energy, nothing comes without a cost! What Carter was doing had huge risks and costs!

Finishing his taco with a feeling of unease, Jim couldn't afford to delay any longer. After getting into his car, he headed straight for the Blake Bank.

"Jim?! What are you..."

About fifteen minutes later, Carter looked at Jim Rogers, who suddenly appeared at the door of his office, rubbing his eyes in disbelief. But before Carter could express his surprise, Jim snorted:

"You're really something, Carter. Enjoying yourself as the chairman of the Douglas Federal Reserve, no, the Georgia Central-Southern Joint Savings Bank?"

With a mocking expression, Jim walked over to sit across from Carter's desk. Without hesitation, he grabbed a cigarette from Carter's desk, lit it himself, and continued sarcastically:

"You're engaging in quantitative easing again, sucking money from outside to fatten up your own territory. Aren't you afraid of causing a meltdown?"

"Huh? What are you talking about? Why don't I understand?"

Confused, Carter rubbed his head, completely failing to grasp Jim's meaning. What Georgia Central-Southern Joint Savings Bank, what quantitative easing, what on earth was he talking about?!

"I'm talking about what you're doing now!!"

Although Carter's bewildered expression didn't seem fake, Jim couldn't help but feel frustrated by this genuine confusion:

"For God's sake, you're a banker, not the head of the central bank! If you know anything about being a small central bank, you'd realize that everything you're doing is no different from central bank regulation! You're raising interest rates to stimulate the economy, then absorbing money from outside. All this money is an excess currency for Douglas at this time! This is quantitative easing, forcefully intervening in the public market with excess funds to influence the direction of LPR."

"Most importantly, your little central bank is going against our big central bank! Singing a different tune! Who gave you the courage to do this?!"

"No, wait, Jim, what are you talking about? I'm still..."

Frantically trying to recall if he had somehow offended Jim, Carter's confusion only grew as he listened. Was there something wrong with what he was doing?

Of course, there was!

Carter was well aware that the current prosperity was just superficial, or in other words, a bubble!

A bubble that was forcibly inflated, such as in real estate.

The livelihoods of nearly 1,700 people from DOG Construction and nearly 1,800 households from DOG Realty were all built on this bubble.

What would happen to these people when all the residential areas were completed?

Outsourcing? That was an option, but where could they find enough work outside to absorb so many construction workers? This was completely different from the scattered HT stores.

Sending out a team of several dozen people was one thing, but if you suddenly sent out a team of 1,800 people, that would be a different story. They would face local opposition, even if they managed to find work.

Moreover, if there was no work, how would they support themselves? That would be a big problem!

"Come here! Sit down, I'll give you a lesson! The most basic economics."

Seeing Carter still didn't understand his point, Jim almost lost his temper.

It felt like being a total noob but somehow ending up as the highlight reel?! Where would these pros put their faces now?!

If it weren't for seeing the high school textbook still on Carter's desk, Jim would have had every reason to suspect that Carter was pretending to be clueless, playing dumb to amuse himself at the expense of this thirty-something old guy.

"The foundation? Money?"

Regardless of what Jim wanted to say, having a big shot give him a lecture, Carter immediately moved a small stool over to sit beside Jim.

"The foundation? And then?"

Glancing sideways at Carter, Jim picked up a blank notebook from the desk and started writing and drawing with a pen.

"The circulation of money is the foundation of the economy, and the core of money circulation is interest rates. Interest rates directly affect the liquidity of money. For example, when interest rates are high, savings rates are high, and people are more willing to deposit money in banks; when loan rates are high, borrowing costs increase, so people reduce borrowing. Consequently, the amount of money available for circulation decreases!"

"And this is exactly what I said, the fundamental approach of the central bank!"

"I know about that! I've been following the changes in the Federal Funds Rate of the Federal Reserve."

Hearing this, Carter immediately raised his hand, indicating that he wasn't completely clueless.

"You know nothing! The Federal Funds Rate is just the overnight lending rate, and the Federal Reserve can only control this! You should have noticed that when the Fed started raising rates, the rates on ten-year and twenty-year treasury bonds also rose, right?"

"Yes, I did notice that!"

If there was anything abnormal about the rise in treasury bond rates, Carter would be concerned. This issue had caught his attention before, and he probably understood that it was the market's response to the Fed's insufficient confidence in raising rates, continuing to believe that high inflation would persist.

"Very good! Then you should understand that the Federal Reserve, including central banks worldwide, actually can't control the interest rates of medium and long-term loans. Hmm, interest rates can be simply understood as the time cost of money!"

"That is, how much money naturally deteriorates over time. The original purpose of interest rates is to maintain the purchasing power of this money without loss! Based on this function, it becomes a source of income."