The purpose of Central Banks (according to Dummies.com) is
Central banks, like the Federal Reserve in the United States, are designed to make sure that their respective domestic economies run as smoothly as possible. In most countries, central banks are expected at the very least to combat inflationary pressures.
The overarching goal of the central banks is to repeal (or keep in check) the boom and bust cycles in the global economy. So far this goal is only an intention, because boom and bust cycles remain in place and are now referred to as the business cycle.
One good impact has come from the actions of the Federal Reserve and other central banks. They’ve been able to lengthen the amount of time between boom and bust cycles to the extent that they’ve smoothed out volatile trends and created an environment in which the futures markets offer a perfect vehicle for hedging and speculation.
A central bank, reserve bank, or monetary authority is a public institution that manages a state’s currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the amount of money in the nation, and usually also prints the national currency, which usually serves as the nation’s legal tender. Examples include the European Central Bank (ECB) and the Federal Reserve of the United States.
The primary function of a central bank is to manage the nation’s money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis. Central banks usually also have supervisory powers, intended to prevent bank runs and to reduce the risk that commercial banks and other financial institutions engage in reckless or fraudulent behavior. Central banks in most developed nations are institutionally designed to be independent from political interference.
“Controlling Money Supply” means increasing or decreasing the money supply. The opposite (leaving the money supply alone or constant) isn’t management. The premise their very existence is based on is that in their infinite wisdom they will increase or decrease the money supply with the wisdom of Solomon and life will be just peachy as a result.
The US Central Reserve Bank was created in 1913. If we look at the economic data for the last hundred years it is hard if not impossible to say it has been a smooth economy. Proponents will then substitute the argument that it would have been worse without the Federal Reserve. That sort of argument is called a “straw man” argument because there is no witness nor record for the basis, only someone’s opinion of what could/would/should have happened which is limited only by their imagination.
Bitcoin, on the other hand, promises a stable money supply – a social contract that everyone knows in advance.