Part 10/17:
A deep dive into banking mechanics reveals the critical issues with fractional reserve banking. Simon explains how banks create digital currency backed by debt, leading to an unsustainable expansion of money supply—a system prone to bubbles, inflation, and economic crises. He emphasizes that such digital money is essentially a Ponzi scheme backed by continual debt growth.
The system incentivizes borrowing for growth, which inevitably leads to economic depressions when debts cannot be repaid. Coupled with money laundering and illicit activity, this creates a fragile foundation for the financial system—one that is susceptible to collapse when confidence erodes or systemic shocks occur.