The way money is created in our modern society is through institutionalised banks handing out loans and then behaving as if that money was deposited. Thus inventing a liability!
This method of creating money is systematically flawed in several ways. The first one being that in order for it to function correctly it must maintain belief. Maintaining this belief in the modern world is becoming increasingly difficult for a number of reasons. One of those reasons is the inequality it is producing. Since almost all money is created by banks, ordinary citizens and businesses pay interest on all money that circulates in the economy. This results in the ‘physical’ economy subsidising the banking sector, adding more debt and transferring funds into the ‘non-physical’ financial banking sector.
This directly effects another issue which is the housing market. Since a large amount of money is being created every time someone takes out a housing loan, more ‘belief’ is needed and more interest is to be paid. This is how the 2008 GFC was created with US investors no longer maintaining ‘belief’ in the value of sub-prime mortgages which caused a liquidity crisis. As a result, stock markets crashed and the entire economy lost confidence in its ability to function. The economy then went into recession as the consumer reduced spending out of fear effecting the entire system and how it requires to function.
Another crisis due to our modern economy that is imminent is an environmental crisis. This is due to the correlation between economic growth, depletion of resources and CO2 pollution. This continued economic dependency and reward for the carbon-based economy is altering the earth’s climate to the point of cataclysmic effect. These major problems in which we create money has forced the rise, use and demand of digital crypto currencies.This takes the power away from big banks and returns it to the citizen through zero fees, decentralization and non-for-profit banking. It is also more suitable to the globalisation of the economy through not having exchange rates,interest rates, transactions charges or other charges of any country thus making it universal. Although crypto currencies look to change the future of money, for now our world is still overly dependant on the current economic system.
By Aidan Green.