format_quote Originally Posted by
MazharShafiq
i was thinking about about paper currency that is it real money ?
Yes, for as long as it is. It cannot last, though.
format_quote Originally Posted by
MazharShafiq
will it cheat us at the end ?
Yes, always.
You see:
[1] money_in_circulation = debt .....
because that is how money is created by the banking system
[2] to_repay = debt + interest .....
because they do not lend it for free
[3] to_repay = money_in_circulation + interest .....
because of [1]
[4] to_repay > money_in_circulation
So, if the banking system does not keep creating new money, you will see defaults and bankruptcies all over.
However, if the banking system keeps creating new money, you get more money chasing the same amount of goods and services. That means: inflation. That means: the money becomes gradually worthless.
This system could only possibly work if the growth of the income/production is larger than the growth of the volume of money.
Reality check 1: The economy has stopped growing.
Reality check 2: They keep creating enormous amounts of money.
You see, the enormous mass of new money just keeps going into the stock exchange. As long as the stock exchange keeps going up, the investors don't care, because they expect that their holdings will become worth more, not because these companies are making more profits and paying out more dividends, but because the next investor will agree to pay more for the current investors' shares. So, it is effectively a Ponzi scheme. If this mechanism no longer works, these investors will flee into commodities: gold, silver, wheat, rice, oil, other foodstuffs, and so on. That means that the prices will suddenly go through the roof. That means that paper money will only be able to buy a fraction of what it could buy before. That means that the money has become worthless.
At the core of the banking system and its money creation process, you have riba/interest. That is exactly the reason why it will collapse. Seriously, there are good reasons why riba/interest is haraam. The fact that riba/interest will completely destroy the existing financial system is only just one of them.