Rant on fractional reserve banking:

Spurred by an argument with a no-coiner about wealth creation.

No-coiner thinks debt from fractional reserve banking creates wealth and economic booms.

His Example: “you have a city with $1,000 total. The bank has $500 of that. The bank loans out $5,000 because that’s how debt works. Now the city has $5,500 of buying power for “stuff”

Response: Okay, now you have 5x the amount of currency in the system, next year when many people go to buy a house it’s 5x more expensive.

You’re not creating wealth in society. You’re transferring purchasing power from people who don’t take out loans to people who do. The vast majority of this is corporate and government debt.

In this scenario, If I never take out debt, my purchasing power is now 5x less than it was.

So now everyone is incentivized to go into debt. Because your taking purchasing power from the everyone who holds the currency. Now I’m forced to go into debt to buy a house because there is literally no other way. This can work for a time period and ends in debt slavery.

Wealth creation comes from trade, and making things better cheaper faster ect. Not fractional reserve banking.

Fractional reserve creates booms because you’re legally stealing purchasing power from savers and the working class and giving it to other people / corporations and governments that are taking out debt to spend on some productive and some not so productive things. They then hire ppl to do the work, creating jobs and everyone is happy and maybe has more purchasing power temporarily.

The issue is that the purchasing power of the currency is greatest at the time of debt issuance, overtime inflation catches up and they have to pay ppl more but wages are the last thing to be adjusted. So it’s a momentary boom but overall the wealth has been accumulated by the productive debt holders and banks, and the working class is worse off because the assets, energy and food they need have inflated faster than their wages. And will do so long after the boom as ended.

It’s like a ratchet, every cycle more and more purchasing power is siphoned to the top. This is why your “dollar ain’t shit”.

So once the common man is forced into debt due to inflation they make him pay back the money they literally created out of thin air via his actual labor, while also charging him interest on the money they created!

Lol the more I think about this the more insane it is.