Opinion  

The economy is a Ponzi scheme

Further to the Project Verde report published by the Treasury Select Committee, whatever excuse the regulators come up with for not spotting a problem that leads to the impairment, or at worse, collapse of a bank, the fact remains that there is one source; one primary cause of all ills in these firms – and our economy as a whole – and that is the fractional reserve banking system that can be best described as a giant Ponzi scheme.

In essence what happens is that private banks create money out of nothing, on the good credit of the borrower, by making loans – and 97 per cent of all money is created this way – on which interest is charged, but where the money to repay that interest is not created in the first place, so that it can be paid back.

So ever more lending has to be made to stop the entire system from crashing, although it did in 2008, and may well do so again soon.

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Kim Andrew Lincoln

Managing director, Mortgage Maude, Telford, Shropshire