I will propose that the banking system is flawed and throughout this article, I’ll give facts to back this, so stick with me.
Government getting involved in money is a good and bad thing it’s a good thing because money gives life to the economy and it makes sense that government manipulates the supply of it, but it has short-term and long-term consequences.
Central bank releases new money strategically and very slowly into the economy because releasing more money at economy causes prices to go up ideally 2% and it means that every year there will be 2% inflation and in-country like India it can be up to 5–6 %,
what does inflation means, in simple terms, let’s say you have 100 rupees today, next year you can buy 98 rupees valued things from that 100 rupee banknote. so if you are one of those people who is keeping their money in their houses, your value of money is deteriorating every year.
We keep our money in banks and whenever we need it we can withdraw and use it, banks are keepers of our money, right? WRONG!
Your money is now the property of the bank in their balance sheets. They can use this money as they want. For example, they can create new money, How?
Suppose you put 100 k in the bank, the bank will keep 10 k and give 90 k as a loan to other customers, but your account still shows 100 k. This 90 k that the bank gave to other customers as a loan is a new money that is just in the bank’s balance sheets, they don’t have any currency or gold to back this new money. This 90 k is new money that the bank has created by giving loans. for example in the UK 97% of the currency that is in circulation actually does not exist, it is just numbers written on computers.
Every year banks create billions by giving loans, the scary part is banks don’t even need your money to give loans, if they consider that someone can repay a loan they give it to them.
Only if 3% of banks’ customers ask for cash, this system will be revealed because banks don’t have currency to give to all of their customers. In the end, we can say banking system is flawed.
Thanks for reading.
if you want to see the Hindi version of this article in video format you can watch it here.
