How debt-based money works

The US central bank is a Board of Governors in Washington plus 12 regional Federal Reserve Banks (Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, San Francisco). The regional banks' stock is held by their member commercial banks. It sets interest rates and acts as lender of last resort.

When a bank makes a loan, it doesn't lend out someone's savings. It creates a new deposit. Under fractional-reserve banking, banks hold only a fraction of deposits as reserves. In the US that required fraction has been zero since 2020. Capital rules limit lending now, not reserves.

So the money supply grows when borrowing grows, and shrinks when loans are repaid.

Money is lent into existence with interest, so the total owed is always more than the money that exists. The only way to service old debt is to issue new debt. Government debt is "rolled over" by selling new bonds to repay maturing ones, and it can never be paid off in full without draining the money supply.

Critics call this a debt Ponzi: it holds up only while the debt keeps growing. As interest costs rise, more new borrowing goes just to pay interest. That's the long-term debt "supercycle" many economists say is near its limit.

Gēēks are issued to people (and the big innovation is the tranches you get on your birthday — 365 dē per verified human per year), not lent into existence by central banks. Nobody owes interest for the unit to exist, which is usury. We might need a UBI/UHI/UBS (universal basic services) economy, when the economy of humans is no longer based on capital, and labour requirements.

We predict massive changes in white-collar (office jobs) labour by 2030, and humanoid robots to replace blue-collar workers by 2040-2050. Read more about: Sound Money and the Promise Ledger.