Lyn Alden: The credit-based global financial system we have participated in over the past century has to continually grow or die
Several of the major central banks are stuck in a trap of their own making. This includes the US Federal Reserve, the Bank of Japan, the European Central Bank, and others. The credit-based global financial system we have constructed and participated in over the past century has to continually grow or die. It’s like a game of musical chairs that we have to keep adding people and chairs to in order for it to never stop. This is because cumulative debts are far larger than the total currency supply, meaning there are more claims for currency than there is currency. As such, too many of those claims can never be allowed to be called in at once; the party must always go on.
When debt is too big relative to currency and starts to get called in, new currency is created, since it costs nothing other than some keystrokes to produce. It’s like this for most major countries... In other words, claims for dollars (debt) grows far more quickly than the economy’s ability to generate dollars, and is far larger than the amount of dollars in existence. When this becomes too much of a problem, the amount of base money is simply increased by the central bank.
Base money is a liability of the central bank, and it’s used as a reserve asset by commercial banks. Broad money is the liability of commercial banks, and it’s used as a savings asset by the public. Treasuries are liabilities of the federal government, and they’re used as collateral by the central bank and commercial banks. In other words, liabilities are collateralized by other liabilities, all the way down....
https://scheerpost.com/2022/06/18/the-european-central-bank-is-trapped-heres-why/
Base money is a liability of the central bank, and it’s used as a reserve asset by commercial banks. Broad money is the liability of commercial banks, and it’s used as a savings asset by the public. Treasuries are liabilities of the federal government, and they’re used as collateral by the central bank and commercial banks. In other words, liabilities are collateralized by other liabilities, all the way down....
https://scheerpost.com/2022/06/18/the-european-central-bank-is-trapped-heres-why/
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