How to design a city?

Right, all the vehicles in central (or any other city) are there for a reason, you slow them down, the journey takes longer, they are in the city for longer, there are more cars in the city at any one point, what am I missing here?

What you're missing is that some (most?) journeys by car can be replaced by other forms of transport. While slowing down private cars will increase congestion during the time it takes drivers to slowly wake up to this fact, the net effect is to discourage car use and reduce congestion. You're thinking in the extreme short-term.

Also - even from your perspective - slower, more consistently moving traffic is faster over the span of a whole journey than faster, more frequently stopping traffic. It's kind of like the tortoise and the hare, except not a fable involving talking animals. Anyone that has witnessed a motorway traffic jam caused only by people slowing down (rather than an actual accident) will be able to understand this. Also, if you are ever caught in a traffic jam on the motorway, it's often worth being in the slow lane, which (despite the presence of slip roads) tends to proceed faster, because of driver psychology. This is the point that has been made about traffic lights and speed limits over and over again earlier in the thread.