1.11 The Debt-Based Monetary System
Why modern economies are built on an unsustainable foundation of ever-growing debt.
The Debt-Based Monetary System
Our current monetary system is debt-based. New money is created when banks make loans. For every dollar in your bank account, someone else owes a dollar plus interest to a bank.
Our current monetary system is debt-based. New money is created when banks make loans. For every dollar in your bank account, someone else owes a dollar plus interest to a bank.
This means the money supply must constantly grow to pay the interest on existing debt. If the money supply stopped growing, the system would collapse because there wouldn't be enough money to repay all the debt plus interest.
The US national debt has grown from $1 trillion in 1981 to over $34 trillion today. This isn't an accident — it's a mathematical requirement of the system. The debt can never truly be paid off without destroying the money supply.
Bitcoin is not debt-based. No one owes anyone bitcoin for bitcoin to exist. Each bitcoin is fully settled, final, and exists independently of any liability. This makes Bitcoin the soundest money ever created.