The Broken Financial System
Foreword
The modern banking system is a house of cards, built on trust but riddled with flaws. Banks are essential for storing money, processing payments, and issuing loans, but they’ve evolved into tools of control, prioritizing profit and power over people. By intermediating every financial transaction, banks hold immense sway over our lives, often to our detriment. The system’s core issues—centralization, opacity, and fragility—make it ripe for exploitation. Banks charge fees, limit access, and can freeze accounts at will, while their failures (like the 2008 crisis) burden taxpayers. This isn’t a system designed for freedom; it’s one that keeps us tethered.
What Is Fiat Currency?
Fiat currency is money that has value because a government declares it legal tender, not because it’s backed by a physical asset like gold or silver. Think of the U.S. dollar, Euro, or Japanese yen—paper bills, coins, and digital balances that we accept because governments and central banks say they’re worth something. Unlike Gold or Bitcoin, which has intrinsic value, fiat money’s value hinges on trust in the issuing authority. Most money today is fiat. It’s created out of thin air by central banks. (like the Federal Reserve in the U.S.)
How Banks Control People?
Banks aren’t just financial institutions; they’re gatekeepers of economic life. Here’s how they exert control:
Dependency: Most people need banks for paychecks, bills, and savings. Without a bank account, functioning in society is nearly impossible.
Surveillance: Every transaction is tracked, creating a digital trail governments or corporations can access. Cash is fading, amplifying this oversight.
Access Restrictions: Banks can deny loans, freeze accounts, or flag transactions based on vague criteria, often without recourse. In extreme cases, governments use banks to silence dissent by cutting off financial access.
Fees and Debt: High fees and predatory lending trap people in cycles of debt, ensuring banks profit while customers struggle.
This control isn’t accidental—it’s baked into a system where banks and governments work hand-in-hand to maintain power.
Fractional Reserve Banking: The Illusion of Money
At the heart of banking lies fractional reserve banking, a system that creates money out of thin air but sows instability. Here’s how it works:
1 - You deposit $1,000 in a bank.
2 - The bank is required to keep only a fraction—say, 10% ($100)—in reserve, as mandated by regulators like the Federal Reserve.
3 - The remaining $900 is lent out to borrowers (e.g., for mortgages or businesses).
4 - That $900 is spent and deposited in another bank, which keeps 10% ($90) and lends out $810.
5 - This cycle repeats, theoretically turning your $1,000 into $10,000 of “money” in the economy through loans.
This process, called the money multiplier, expands the money supply but creates a problem: most money exists as digital entries, not physical cash. Only about 8% of the world's currency is physical cash. If too many depositors demand withdrawals simultaneously (a bank run), the bank fails because it doesn’t have enough cash on hand. The 2008 financial crisis exposed this fragility, with banks over-leveraged on shaky loans.
Fractional reserve banking fuels growth but also instability, as it relies on confidence in a system where actual cash is scarce. It’s a high-stakes gamble masquerading as stability.
The Federal Reserve: A Ponzi Scheme?
The Federal Reserve, America’s central bank, is often called the linchpin of the economy. But critics argue it operates like a Ponzi scheme—a system that depends on new money to prop up old promises. Here’s why:
Money Creation: The Fed “prints” money by buying government bonds (Quantitative Easing) or lowering interest rates, flooding banks with cash. From 2008 to 2025, the U.S. money supply (M2) grew from $8 trillion to ~$21 trillion, much of it created to bail out banks or fund deficits.
Debt Dependency: The Fed enables endless government borrowing by keeping interest rates low and buying bonds. The U.S. national debt hit $33 trillion in 2023 and keeps climbing. New debt pays off old debt, mimicking a Ponzi scheme’s need for fresh investors. US Debt Clock.
Inflation as a Tax: Printing money devalues the dollar, causing inflation (e.g., 9.1% in 2022, ~3–4% in 2025). This erodes savings, forcing people to work harder to maintain purchasing power—a hidden tax that benefits debtors (like the government) and punishes savers.
No Exit: Like a Ponzi scheme, the system collapses if trust fades or debt becomes unsustainable. Raising rates to curb inflation risks crashing the debt-laden economy, so the Fed is trapped in a cycle of printing and borrowing.
The Fed isn’t a literal Ponzi scheme, as it’s backed by the government’s taxing power, but its reliance on perpetual debt and money creation shares unsettling similarities. It’s a system that can’t stop without imploding.
CBDCs: A Dystopian Threat
Central Bank Digital Currencies (CBDCs), like a digital USD or Euro, are pitched as modern upgrades to cash. But they’re a wolf in sheep’s clothing, amplifying control and threatening freedom. Unlike cash, which is anonymous and decentralized, CBDCs are fully digital, issued and tracked by central banks. Here’s why they’re bad for society:
Total Surveillance: Every CBDC transaction is traceable, creating a permanent record. Governments could monitor spending habits, flag “suspicious” activity, or punish dissenters by freezing accounts.
Programmable Money: CBDCs can be coded with rules, like expiration dates to force spending or restrictions on what you can buy. Imagine a government banning purchases of certain goods or penalizing “undesirable” behavior.
Negative Interest Rates: With CBDCs, central banks could charge you to hold money, forcing spending to “stimulate” the economy. Cash lets you opt out; CBDCs don’t.
Exclusion Risk: Governments or banks could cut off access for non-compliance (e.g., vaccine mandates, political views), locking people out of the economy.
No Privacy: Cash offers anonymity, letting you buy coffee without a digital footprint. CBDCs eliminate this, making every transaction a potential data point for governments or corporations.
Pilot programs for CBDCs are underway globally (e.g., China’s digital yuan, the ECB’s digital Euro trials). If adopted, they’d give central banks unprecedented power, turning money into a tool of control rather than freedom. The banking system is broken, designed to control rather than empower.
Conclusion
The banking system is broken, designed to control rather than empower. Fractional reserve banking creates fragility, the Fed’s money-printing fuels inflation and debt, and CBDCs threaten to turn money into a surveillance tool. Calling the Fed a Ponzi scheme may sound extreme, but its reliance on endless debt and devaluation raises red flags. We don’t have to accept this. By understanding the system’s flaws and exploring alternatives like Bitcoin we can push back. Financial freedom starts with awareness—and the courage to demand a better system. Once you understand how Bitcoin works, you are gonna want to switch to it.
Dominik Urbanics
