Drawbacks of our monetary system and economy

Up to now, the vast majority of new currency entered the economy via loans — This includes loans made by private banks to individuals and also loans made by reserve banks to governments (E.g. for spending on government salaries and contracts). On the other hand, currency is removed from the economy primarily via loan repayments.

Since loan repayments carry additional interest and sum up to a number which is greater than what was originally loaned, it is necessary that reserve banks and private banks inject a constant flow of new, increasingly large loans into the economy to offset the deflation caused by the ongoing repayment of past loans[1]; the constant inflow of new loans allows each generation of borrowers to pay off their personal debts using new credit taken out by the next generation of borrowers. Although this system may allow individuals to fully pay off their personal debts after some time, debt as a whole never goes away; it is merely transferred from one generation to the next and it keeps getting bigger over time.

Since 2008, however, the Federal Reserve Bank of the United States (among others) introduced two new mechanisms to inject new money into the economy without simultaneously creating new debt; the most publicized one was Quantitative Easing (QE); it allowed the Fed to create new money and use it to buy assets (e.g. toxic assets such as bad mortgage-backed securities) from big private banks without saddling them with additional debts[2][3].

The other major but less known change which occurred in 2008 was that the Fed started paying interest on deposits made by large institutions[4].

Nowadays, because of the two new money-creation mechanisms discussed above, it is no longer absolutely necessary for the Fed to keep making new loans in order to keep the system solvent; unlike loans, these new mechanisms do not simultaneously add more debt into the system; they are ‘money printing’ in its purest form.

To summarize the current situation; since 2008, some large institutions have been able to use their existing currency holdings to earn interest and therefore collect free, newly ‘printed’ money directly from the Fed — This has given them a massive competitive advantage in the markets over any entity which does not receive free money…