Operating within this structure, the only products or services that get through the gate of financing, and that are also in the interest of the users of money, are those that provide profit for the banking industry. The welfare of money's users, and the health of the ecosystems on which we depend are not first priority.
The casino
The best way that I have found to characterize the present money system is by using the metaphor of a casino. In a casino, we have three main groups of players. First is the house, the owner of the casino. Second is a group of contract table operators and one armed bandits, which are the interface with the customers. The customers of the casino are the third group.
In our money system, the 'too big to fail' banks and bankers are the house, local banks and ATMs are contract table operators and one armed bandits, and traders are the customers of the casino. However going to this casino is mandatory, instead of optional, if one is to pay taxes or make trades in the economy.
Local bankers, who are the banking system interface with the public, often see themselves as a service to the public, and are seen as such, masking the results of system operation. At the same time, local bankers have to deposit reserves with the central bank, the Federal Reserve - also known as the Fed, to the tune of 5-10% of the money that they create. This initial High Powered Money is in turn created by the Fed out of nothing. In this way, the central bankers, who hold a controlling interest in the Fed, get a cut on all loans made by local banks, in addition to their direct interest income from the large loans that they make to the Federal Government and large corporations and smaller loans they make to traders who deal at their branches vii.
Interest is the mechanism that provides the profit for the money casino. However interest is treated differently than principal. It is not created as new money. Interest is created only as a debt to the bank making the loan. So interest has to be paid out of money already in circulation. If there is no growth in the economy, not enough money has been created for the use of the Main Street trading community to pay both principal and interest when they both come due, as m ore money is owed to the banking industry than was created.
This set of accounting rules with central control, interest, and a for profit money creation industry, leads to a number of structural issues; some are very practical in terms of monetary stability, and others are moral implications of the basic practical issues. These results of system operation will help us understand why we are approaching a monetary cliff.
Practical issues with interest bearing money:
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