7. What’s Wrong with our Money?
At the foundation of our financial system lies a critical but often overlooked characteristic: all money is created as debt. Every dollar circulating in the economy originates from a loan, whether it’s from commercial banks lending to individuals and businesses or from central bank actions, like purchasing government bonds. This dependency on debt-based money creates a system where borrowing is not just common but necessary, and economic growth itself hinges on the continuous expansion of credit.
The implications of this debt-based structure ripple throughout the economy. We can trace most of our economic problems to this origin of money as debt. Debt, though enabling short-term growth, demands constant repayment, binding individuals, corporations, and even governments into a cycle of borrowing, paying interest, and borrowing again. As debt accumulates, so does the need to service that debt, leaving less and less for discretionary spending or saving.
In this chapter, we’ll explore the direct consequences of a debt-based monetary system. We’ll examine how debt creation fosters economic dependency, fuels the demand for exponential growth, and restricts the government’s financial independence. Additionally, we’ll preview other systemic issues arising from this structure, issues that will be analyzed in greater detail in subsequent chapters. Through this analysis, we aim to demonstrate why the design of a debt-based system lies at the heart of many financial challenges faced by modern economies.
The Purpose of Money
Money is a fundamental invention that has shaped human civilization and economic interaction for millennia. At its core, the purpose of money is to facilitate the exchange of goods and services, making trade more efficient and societies more prosperous. Besides acting as a medium of exchange which facilitates economic activity, money also serves as a store of value and a unit of account.
As a store of value, money enables individuals to save the fruits of their labor for future use. Unlike perishable goods, money does not spoil and can retain its value over time (assuming stable economic conditions). This function encourages saving and investment, which are essential for economic growth and stability.
Money provides a common measure of value, which simplifies the process of setting prices and recording debts. By expressing the value of goods and services in standardized monetary units, money allows for easy comparison and accounting. This uniformity aids consumers and producers in making informed economic decisions, budgeting, and planning for the future.
By simplifying transactions and encouraging trade, money plays a crucial role in the expansion of economies. It allows for specialization, where individuals focus on producing specific goods or services more efficiently, knowing they can trade for other necessities. This specialization boosts productivity and innovation, driving economic development.
Money is the bedrock of financial systems, enabling the creation of complex economic structures like banking, credit, and investment markets. These institutions leverage money to allocate resources, manage risks, and fund new ventures, contributing to overall economic prosperity.
The Value of Trust
While money serves as a medium of exchange, a unit of account, and a store of value, none of these functions would be possible without a foundational element: trust. Trust is the cornerstone that allows money to operate effectively within an economy. It is the collective belief in the value and stability of money that enables individuals and businesses to engage confidently in financial transactions.
Money, especially in its modern forms, has little to no intrinsic value. Paper bills and digital balances are valuable because people believe they can be exchanged for goods and services now and in the future. This belief is rooted in trust, trust in the stability of the currency, trust in the institutions that issue and regulate it, and trust in the legal systems that uphold financial agreements.
Money’s role as a unit of account depends on its ability to provide a consistent measure of value. Trust in the currency’s stability allows prices to be set, contracts to be written, and financial records to be maintained with confidence. Without trust, the value of money becomes unpredictable, making it difficult to compare prices or plan for the future.
Financial institutions like banks play a crucial role in maintaining trust in the monetary system. People deposit their money in banks trusting that it will be safe and accessible when needed. Banks, in turn, lend to borrowers, which facilitates economic activity. A breach of trust, such as a bank failure, can lead to bank runs and financial crises.
Governments and central banks are responsible for regulating the money supply and ensuring economic stability. Trust in these institutions is vital. Sound monetary policies, transparency, and accountability foster confidence. If a government is seen as irresponsible, perhaps by excessively financing deficits, it can erode trust, leading to inflation and a loss of confidence in the currency.
A robust legal system underpins trust in money by enforcing contracts and protecting property rights. When legal systems are effective and fair, individuals and businesses feel secure in their financial dealings. This security encourages participation in the economy and adherence to financial obligations, such as repaying debts.
In today’s digital economy, trust extends to the technological platforms that handle monetary transactions. Online banking, digital wallets, and cryptocurrencies all rely on users’ trust in the security and reliability of technology. Cybersecurity breaches or technological failures can quickly undermine confidence and disrupt economic activity.
When trust in money erodes, the consequences can be severe. Breeches of trust, like excessive credit expansion (debt/money creation) leads to inflation, or if excessive enough, hyperinflation. The degree of inflation will be reflected in the loss of value in the money circulating.
If people lose faith in their money, they may substitute other currencies or commodities in their transactions. Some think that the introduction of Bitcoin was in response to lack of faith in the U.S. currency in the wake of the Global Financial Crisis. Sometimes foreign currencies circulate because of the loss of faith in a country’s sovereign currency.
The loss of faith in a country’s currency can lead to reduced economic growth or even economic contraction. This can lead to unemployment and social unrest.
Money as Fuel
Money acts as the fuel of an economy, facilitating the exchange of goods and services, driving production, and supporting innovation and growth. Ideally, this fuel flows efficiently through all sectors, powering investments, job creation, and consumption. However, factors like inequality and poverty can impede this flow, much like a misfiring engine.
With the flexibility of fiat money, there’s an unprecedented ability to include all members of society in economic participation. Fiat money, unbounded by commodity constraints, allows for policies and programs that can target widespread inclusion, ensuring the economy operates at full capacity and benefits all segments of society.
Debt Enslavement
At the heart of our financial system lies the process of money creation by commercial banks. When a bank issues a loan, it doesn’t lend out existing money; instead, it creates new money through accounting entries. This process increases the money supply because the loan becomes a new deposit in the borrower’s account.
A critical issue arises when considering the repayment of these debts. Since money is created as debt, repaying loans effectively destroys money. When borrowers pay back their loans, the corresponding amount of money is removed from circulation. If all members of society attempted to repay their debts simultaneously, the money supply would contract sharply, potentially leading to deflation and economic stagnation due to a shortage of circulating money.
Economists talk about a “business cycle” as though it is an inevitable part of economic activity. One cause of these business cycles is the procyclical nature of money creation. In good times, loans/money creation increases, and the economy grows. Then, as business growth slows, for whatever reason, lending slows or stops. Debt repayment (or even foreclosures) then reduces the supply of money, and the cycle continues until the next upswing in lending.
The Enslavement Part
Loans are issued with interest, but the interest portion of the debt is not created as part of the principal loan amount. This means that the total debt owed (principal plus interest) exceeds the amount of money in circulation. As a result, there is always more debt in the system than money available to pay it off, creating a perpetual debt cycle.
For economies to grow under this system, the money supply must continuously expand to accommodate increasing production and consumption. This expansion occurs through additional lending, which means incurring more debt. Businesses seeking to invest in new projects and individuals aspiring to improve their living standards borrow more, leading to an exponential rise in overall debt levels.
The structure of a debt-based monetary system implies that thrift and savings alone cannot eliminate the collective debts of society. Even if every individual and business saved diligently, the cumulative debts, including the interest, would still surpass the total amount of money available. The interest payments required exceed the existing money supply because the interest portion was never created in the first place.
Because money is created by financial institutions when they issue loans, society becomes indebted to these money creators. The interest payments made by borrowers represent a continuous transfer of wealth from the public to the financial sector. Over time, this can lead to increasing income and wealth inequality, as those who control the creation of money and those who have easy access to that money because of accumulated wealth accumulate more resources relative to the rest of society.
The debt-based monetary system plays a central role in shaping modern economies, but it also presents significant challenges. That inequality creates an environment where those with financial and political power want to maintain the status quo because removing the problems created by debt-based money means undermining the source of their power.
The Exponential Growth Problem
The creation of money as debt fuels an ever-expanding need for more money, creating a cycle where debt growth drives exponential increases across nearly every aspect of the economy. This continuous expansion, however, does not occur evenly. While wages, prices, and taxes may rise at one rate, stock prices, real estate values, and raw material costs may surge at another. These uneven growth rates introduce significant instability, as sectors experiencing rapid expansion attract more lending and investment, often forming bubbles that are unsustainable.
When these bubbles emerge in critical sectors, such as housing or technology, they often trigger central bank interventions. To cool overheated markets, central banks typically raise interest rates, which can exacerbate economic strain, especially in sectors already struggling with slower growth. The impact of these interventions ripples across the economy, amplifying financial volatility and increasing the likelihood of recessionary cycles.
The Shrinking Adjustment Period
One of the most dangerous consequences of exponential economic growth is that it reduces the time available for adjustments between key economic factors. Wages, prices, and asset values are all interconnected, requiring time to adjust to shifts in supply, demand, and productivity. However, as growth accelerates, the time allowed for these adjustments shrinks, leading to friction and instability.
As each growth cycle shortens adjustment periods further, businesses and households have less time to plan, save, or invest with confidence. The result is an environment where economic decisions become increasingly reactionary, rather than strategic. Central banks and governments, forced to respond rapidly, often implement policies with limited foresight, increasing the risk of miscalculated interventions that worsen economic conditions rather than stabilize them.
This constant race to adjust fuels economic shocks, making recessions and crises more frequent and severe. The system moves at an ever-accelerating pace, leaving little room for measured responses, and heightening the risk of sudden financial collapses.
Debt-Driven Competitive Pressure
Beyond the structural instability it creates, a debt-based economy also shapes societal behavior, intensifying competition and financial pressure across all levels. Businesses, under constant pressure to maintain growth, face an environment where the choice is often to expand or die. Rather than competing through innovation or efficiency, many businesses resort to mergers and acquisitions, consolidating markets to eliminate competition rather than outperforming rivals.
Individuals, too, are caught in this relentless cycle. The cost of living continuously rises, forcing people to save aggressively for retirement, uncertain how inflation will erode their purchasing power. The fear of future financial insecurity leads to conservative spending habits, reducing economic dynamism and making downturns more severe.
Even governments struggle under this system. As costs increase, they must balance rising expenses with public pressure to keep taxes low, leading to difficult budgetary trade-offs and mounting public debt.
An Economy Without Stability
In a system driven by debt and exponential growth, economic expansion does not lead to stability; it creates relentless pressure. Every aspect of society must keep pace with rising costs, ensuring that the future is not just uncertain, but predictably more expensive than the present. The “rat race” mentality is not a byproduct of capitalism. It is debt that drives a system where stability is unattainable and survival depends on constant acceleration.
Government Abdication of Money Creation
The decision by governments to delegate money creation to commercial banks has had far-reaching consequences. By relinquishing their sovereign authority to issue currency, governments have transferred this power to private institutions that lend money into existence. Upon learning this, many might wonder: why would a government capable of granting such power to banks not retain it for itself? Instead of issuing money directly, governments borrow the very currency they could, in theory, create, becoming dependent on debt-based financing rather than direct issuance. This choice has fundamentally shaped modern economies, embedding a structural reliance on debt and complex financial systems designed around commercial bank-created money.
The Legacy of the Gold Standard
Much of this approach originated under the gold standard, which dictated that the money supply remains relatively constant and constrained by the availability of gold reserves. Around the time of the Federal Reserve’s founding, mainstream economic thought held that money should be tightly controlled, with commercial banks acting as the primary creators of circulating money through lending, while central banks and governments controlled gold reserves, which ultimately backed the monetary system.
During this era, new money creation was indirectly regulated through central bank interventions. Governments influenced money flow through taxation, spending, and bond issuance, while central banks controlled lending conditions to manage the broader money supply. However, wars and economic crises revealed the limitations of a system tied to a finite resource like gold. The inability to expand the money supply as needed led to economic strain and funding shortfalls, forcing governments to navigate financial crises within a rigid framework.
The transition to fiat currencies severed the link to gold, theoretically granting unprecedented flexibility in money creation. However, rather than fully adapting to the possibilities of government-issued fiat currency, policymakers retained the structure of bank-created money.
In this system, commercial banks remained the primary issuers of new money, creating it through lending, while governments continued to borrow rather than directly manage the money supply. The result was a continuation of debt obligations that were no longer necessary under a fiat system. Instead of leveraging fiat money’s potential to create currency without accumulating debt, governments maintained their reliance on borrowing from private institutions, generating interest costs and perpetuating cycles of debt.
Entrenchment and the Debate Over Reform
More than a century after the Federal Reserve’s founding, the global financial system remains deeply entrenched in this model. Entire industries and institutions are built on commercial bank-created money, making systemic change complex and disruptive. Yet, with the emergence of Central Bank Digital Currencies (CBDCs), this debate has resurfaced. Some CBDC proposals advocate for a system where central banks assume greater control over money creation, reducing the role of private banks in the process.
This discussion presents an opportunity to reconsider whether reliance on bank-created debt is still the best approach. The long-term consequences, rising public and private debt, growing wealth inequality, and periodic financial instability, suggest that the system may no longer serve modern economies effectively. While dismantling or reforming this structure would be a complex challenge, CBDCs represent one of the first serious proposals to alter the source of money creation.
As discussed in Chapter 6, Central Bank Digital Currencies (CBDCs) could pave the way for governments to use fiat money to its fullest potential, reducing dependence on debt while maintaining control over fiscal policy. However, current proposals for CBDCs remain vague on a critical issue, how the newly created money will be issued and distributed. Unlike commercial banks, which introduce money through lending, or treasuries, which issue money into the economy by spending it, central banks lack a clear mechanism to ensure effective money distribution.
One of the most widely discussed ideas surrounding CBDCs is that central banks would no longer be required to maintain a positive net worth. This would allow them to issue money without offsetting liabilities, fundamentally changing how they operate. However, without a clear framework for distribution, this shift presents serious risks.
The most obvious method for central banks to distribute CBDCs would be to channel them through commercial banks. This approach would preserve commercial banks’ dominance over money creation, allowing them to decide who receives new money and under what terms. Such an arrangement would be ripe for political and economic corruption, as large financial institutions could gain privileged access to central bank-created money, reinforcing existing inequalities and creating opportunities for favoritism and financial misallocation.
Alternatively, if central banks attempted to distribute CBDCs directly to the public, through government programs, direct transfers, or universal basic income-style payments, this would blur the lines between central banking and fiscal policy, raising questions about the role of monetary authorities.
Unlike treasuries, which are naturally positioned to spend money into circulation through public expenditures, central banks have no direct mechanism for widespread distribution. Without careful planning, CBDCs could create imbalances, where money pools in financial institutions rather than circulating broadly across the economy.
These unresolved questions highlight the fundamental tension between monetary creation and distribution. If CBDCs are introduced without structural reforms, they risk becoming merely another tool for embedding inequality, reinforcing existing financial dynamics rather than addressing the systemic issues of debt-driven money creation.
A New Era of Monetary Policy?
In Chapter 11, we will explore alternative monetary designs that could allow governments to exercise more direct control over the money supply, ensuring that fiat money serves public economic needs rather than reinforcing financial sector dominance. While CBDCs represent a potential turning point, their design and implementation will determine whether they enhance economic stability or deepen existing financial inequalities. In Chapter 11, we will argue that CBDCs are unnecessary. There may, however, be a role for blockchain technologies.
By rethinking how fiat money is introduced into the economy, policymakers could reduce debt burdens, increase financial stability, and create a system better aligned with modern economic needs. The transition to digital, centrally issued money presents both opportunities and risks, but without a clear, fair, and transparent framework for its distribution, CBDCs may ultimately reinforce rather than reform the current financial order.
Creating True Wealth
In any economic system, money serves as fuel, an essential source of energy that powers the complex machinery of production, trade, and innovation. At its best, money flows purposefully, fueling the creation of tangible goods and services that build a lasting foundation for society. This productive economy includes all sectors that draw on labor, resources, and capital to transform basic materials into valuable assets. When money circulates through these productive avenues, it yields enduring wealth: infrastructure that connects us, housing that shelters us, and technology that enhances our capabilities. Each of these assets not only serves current needs but also supports the capacity of future generations to build upon what came before, forming a cycle of sustained growth and progress.
To sustain this productive economy, resources must be continually reinvested, fueling each new cycle with inputs of money, labor, and raw materials. When this balance is maintained, the economy runs smoothly, providing for the well-being of its participants while allowing for consistent innovation. Yet not all sectors contribute equally to this enduring wealth. Alongside the productive sectors, a large share of the economy is dedicated to consumables, goods and services that satisfy immediate needs or desires. About 85% of economic output is consumed. Some of these consumables, such as food, healthcare, and education, are essential, directly supporting quality of life and ensuring that society can function at a high level. Others, like art and entertainment, enrich our experiences, providing a sense of purpose and community that transcends purely material needs.
Within the category of consumables, however, lies a subset that drains more from society than it gives back: destructive consumables. These are expenditures that absorb society’s economic fuel without yielding a proportional return in value. Unnecessary litigation, for instance, can spiral upwards without necessarily resolving conflicts in a way that benefits society. Rising interest payments on debt, another example, consume vast financial resources while contributing nothing of enduring worth. And the economic toll of warfare, which destroys resources and disrupts productive sectors, adds further to this category of destructive costs. These expenditures draw funds away from sectors that could otherwise enhance the wealth of society. Instead of building a stronger economic foundation, they absorb money without generating new value, serving as a drag on the economy’s productive potential.
In a debt-based monetary system, the presence and impact of consumables grow with the economy itself. Debt-based money requires that nearly all funds be borrowed into existence, creating an inherent pressure for the economy to expand continuously. But as the economy grows, so does the demand for money, and with it, the reliance on borrowed funds and the inevitable cost of interest. Interest, a seemingly innocuous cost of borrowing, is in fact one of the most significant destructive consumables in this system. Because interest payments accumulate over time, they consume an ever-growing portion of the money supply, funneling resources from productive investments into the realm of debt service. This gradual siphoning weakens the productive economy by redirecting funds from sectors that could generate future value. As debt grows, so do the burdens of repayment, leaving society locked in a cycle where an increasing share of its resources is absorbed by financial obligations that provide no productive return.
Debt-based money also introduces an inherent conflict between two fundamental roles of currency: as a medium of exchange and as a store of value. To fuel economic activity, money must circulate freely, supporting production and consumption. However, when money circulates too freely, inflationary pressures arise, diminishing the value of currency as a store of wealth. To counter this, governments must remove excess money from circulation, either through taxation or through raising interest rates to inhibit or even contract money growth. Yet, this process of extraction brings its own set of challenges. Taxation, while necessary to control inflation, often stirs resentment, as citizens are called upon to part with money they have earned and saved. Rising interest rates disproportionally impact those lower on the economic ladder. This conflict between the need for monetary stability and the desire for wealth preservation creates ongoing friction within the economy, as individuals strive to maintain financial security even as government policies attempt to balance the money supply.
The debt-based system also inherently favors certain sectors, creating an uneven distribution of resources that hampers the economy’s full potential. Because those who hold capital are best positioned to lend or borrow, the system naturally channels more resources into the financial sector and toward those with existing wealth. Over time, this inequitable flow of money means that only certain sectors of the economic engine receive adequate “fuel,” while other parts are left under-resourced. As a result, many sectors struggle to reach their productive potential, not for lack of innovation or labor but because the money needed to support their growth is disproportionately allocated elsewhere. The result is an economy that, rather than functioning at full capacity, is held back by structural imbalances that limit its overall productivity.
Compounding these issues is the lingering legacy of the gold standard, which continues to shape perceptions of money and debt. Under the gold standard, the money supply was relatively fixed, constrained by the amount of gold available to back currency. When fiat money replaced gold-backed currency, the possibility for a flexible money supply emerged, but the underlying mindset, one that associates value with scarcity, persisted. This legacy limits the understanding of fiat currency, restricting the potential benefits of a flexible money supply and obscuring the inherent risks. With fiat money, we can create and remove currency as needed to address economic demands, but we must also recognize that fiat money, like fire, can be as dangerous as it is powerful. In controlled conditions, it can fuel growth and stability; if left unchecked, it can lead to inflationary spirals and financial instability. This dual nature of fiat currency is the essence of Economic Fire, capturing both its potential to drive progress and its capacity to cause harm.
These inherent risks within the debt-based framework reveal the limitations of a system that relies on debt for nearly all monetary expansion. By understanding how money serves as both fuel and store of value, and how these roles can conflict, we begin to see the complex dynamics at work in the modern monetary system. This exploration will lay the groundwork for understanding why a debt-reliant economy faces continual instability and why systemic reform may be the only way to achieve sustainable growth.
Financialization
Financialization in a debt-based system extends beyond the idea that money is created through borrowing, it hinges on the circulation of debt itself as a form of currency. This phenomenon, where debt instruments like bonds, loans, and other credit-based assets are traded, invested, and used as collateral, makes debt an essential and fluid part of the economic landscape. As debt circulates in the economy, it becomes an asset that can be traded, securitized, and leveraged, fueling a continuous demand for more debt. This demand creates a feedback loop where debt issuance not only facilitates spending but also becomes a fundamental asset in the financial system.
The underlying driver of financialization is the persistent shortage of money in the economy. Individuals, businesses, and governments constantly need more funds to meet their needs, cover unexpected expenses, or fuel growth ambitions. This shortage creates a near-constant demand for additional debt, which banks are eager to supply, leading to ever-expanding levels of credit issuance. As more debt is issued, financial markets absorb it, packaging it into securities and other financial products that circulate within the financial system. This circulation of debt products, in turn, fuels further financialization, as financial institutions seek profit from interest, fees, and investment returns on these debt-backed assets.
This reliance on debt has significant implications. As debt circulates and grows, the economy becomes increasingly oriented around financial markets and asset values, rather than tangible economic activities like production or infrastructure development. This shift concentrates wealth and influence in the financial sector, where those who hold and trade in debt assets benefit most from the system. Meanwhile, the average individual or business faces higher costs as they borrow to keep up with the demands of the economy, creating a cycle of dependency on debt that underpins both economic growth and financial inequality.
Thus, in a debt-based money system, financialization doesn’t just shape economic growth, it transforms the economy into one where debt itself drives demand. This cycle of demand and issuance creates a structural dependency on financial markets, embedding debt further into the core of the economy and shaping its direction and growth.
We will discuss financialization in the U.S. economy in detail in chapter 9. Financialization is a drain on the productive economy that is not compensated for by the funds provided by financiers.
The Reserve Barrier
Originally, bank reserves were designed to ensure stability by preventing runs on commercial banks, where all depositors would attempt to withdraw their money at once. Over time, these reserves evolved into an interbank settlement tool, allowing banks to settle debts among each other.
Reserves facilitate financial transfers between banks, the U.S. Treasury, and other central banks globally, creating an efficient financial settlement system. The structure of reserves inherently separates central bank-created money from the commercial bank-created money that circulates within the economy. Central bank money is held in reserve accounts, inaccessible to the public and the central bank’s customers, commercial banks. To make central bank money usable in the economy, a reflection occurs: central banks credit reserves on the central bank side, and commercial banks create a corresponding entry in customer accounts, allowing those funds to flow into the broader economy without directly crossing the “reserve barrier.”
This reserve barrier allows central banks to inject or withdraw money from the economy indirectly. By purchasing or selling assets like government bonds, central banks increase or decrease reserve levels, which in turn allows commercial banks to mirror this action by adjusting customer accounts. The central bank sets the interest rate on these injections or withdrawals, which influences, though indirectly, the interest rates that commercial banks offer to customers. However, this approach to controlling economic activity is often inefficient, as it relies on commercial banks to adjust their rates and lending practices in response to central bank moves rather than directly controlling the rates in the broader economy.
In Chapter 8, we’ll explore in more depth how the reserve barrier amplifies the financialization of an economy. Understanding this barrier is central to understanding how money flows between the financial sector and the real economy, shaping the structure and stability of the debt-based system.
An Unsustainable System
The current debt-based monetary system shows clear signs of being unsustainable. As we saw in the discussion on exponential growth, the need for continual expansion creates a compounding effect where various economic factors, debt, interest payments, asset prices, and general cost levels, escalate at exponential rates. This relentless growth pattern compresses the time allowed for these factors to respond to each other, leading to heightened volatility and fragility. In such a setting, debt levels drain an increasing share of resources from the productive economy, diverting money toward interest payments and refinancing rather than sustainable growth or investments in public welfare. As this burden grows, maintaining the system becomes ever more challenging.
The Global Financial Crisis (GFC) of 2008 serves as a stark warning of this instability. The extraordinary interventions by central banks to stabilize economies exposed the structural weaknesses of the system. Central banks deployed quantitative easing (QE) and created the “ample reserves environment,” buying trillions in government and mortgage-backed securities to inject liquidity. While these actions stemmed the immediate crisis, they did so at a steep cost: central banks accumulated massive debt holdings and a dependence on ever-expanding balance sheets. As discussed in Chapter 6, Central Bank Digital Currencies (CBDCs) represent the next phase of this intervention, partially intended to provide an escape route for central banks now burdened with unmanageable debt levels and liabilities.
Yet, these measures are only temporary solutions, addressing symptoms rather than the system’s structural issues. QE and the ample reserves environment may have postponed collapse, but the debt-dependency remains. CBDCs, while offering some potential efficiencies, are poised to act as another Band-Aid for society’s unsustainable debt burdens. Without systemic reforms that address the underlying reliance on debt for economic growth, the same risks will resurface, potentially on a larger scale.
If no meaningful changes are made to the current system, an eventual collapse becomes nearly inevitable. The structural flaws that make growth dependent on debt, encourage financialization, and concentrate wealth. These flaws will continue to strain the economy. In Chapter 10 and later in Part 3, we will explore potential solutions that could avert such a collapse, providing alternatives to debt-based money creation and ways to foster a sustainable, balanced economy that does not rely on perpetual growth or bailouts to remain functional.