Almost all money is created by banks when they approve a loan. Notes and coins created interest-free by the New Zealand government amount to a mere 1.6% of our money supply; the rest is created as interest-bearing bank debt. This is a system that harbours the seeds of its own destruction.
Deregulation of banking 30 years ago compounded the problem, leading to a range of riskier and riskier “financial products” and a credit bubble. The resulting Global Financial Crisis that began in 2007 is nowhere near fully unwound.
The process by which banks create money is so simple that the mind is repelled.
— Economist John Kenneth Galbraith
The fatal flaw with the current money system is that money is always in short supply. Banks providing loans create the principal only, leaving borrowers to find extra money to repay the interest, either by increasing their production, competing with others facing the same problem or by further borrowing. So the money supply must keep increasing, and with it, the total debt.
The never-ending need to increase production causes intolerable demand on natural resources. The competition for an inadequate supply of money is a bit like musical chairs: someone misses out, and bankruptcy is inevitable for some of the losers. Further borrowing compounds borrowers’ problems, consigning them to long-term and often inescapable debt.
Now you're asking the right question!
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