kevin_strom on Nostr: Another way that fractional-reserve banking makes us wasteful is not much talked ...
Another way that fractional-reserve banking makes us wasteful is not much talked about: When the bank makes a $1000 loan, it creates $1000 out of thin air. (Most on NOSTR know that already.)
But what few think about is that the bank then demands, not $1000, but, say $1100 in "repayment." This extra percentage then has to be extracted from someone's real wealth, or it must be itself created later by future loan-triggered economic activity. And in a total fiat system, where all "dollars" are actually loans, the economy must ALWAYS GROW so it can pay the total principal plus interest, even though the interest amount was never created.
That is why the pundits always get scared when there is not enough "growth." You can never have a steady state, even though people can be perfectly happy with a steady state. The whole fractional reserve house of cards requires cancer-like growth at all times.
But what few think about is that the bank then demands, not $1000, but, say $1100 in "repayment." This extra percentage then has to be extracted from someone's real wealth, or it must be itself created later by future loan-triggered economic activity. And in a total fiat system, where all "dollars" are actually loans, the economy must ALWAYS GROW so it can pay the total principal plus interest, even though the interest amount was never created.
That is why the pundits always get scared when there is not enough "growth." You can never have a steady state, even though people can be perfectly happy with a steady state. The whole fractional reserve house of cards requires cancer-like growth at all times.