How about the banking system?
"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.”
This quote is a reminder of the role that banks play in the economy. The banking system creates the money that is in circulation, whether it is in the form of cash or credit. This means that every dollar that we use in our daily transactions has been created by a bank through the issuance of loans.
This reliance on bank loans for the creation of money is a significant problem as it highlights the fragility of the financial system. If there is a shortage of loans, the money supply will decrease, and if there is an overabundance of loans, the money supply will increase, leading to inflation. The absence of a permanent money system exacerbates this problem and leaves the economy susceptible to market forces.
The dependency of the economy on bank loans and the creation of fiat money by commercial banks is a crucial subject that must be understood and studied by all individuals. A failure to do so could lead to disastrous consequences for society, and it is essential that steps are taken to improve the system.
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