The banking system continuously and increasingly creates new credit with a few keystrokes, without any corresponding real physical value or wealth. The new credit is counted as money, equal in worth to central bank issued notes and coins. The credit is issued as a loan, granted to recipients preferred by the issuing bank, who then may benefit from newly created money before the increased total amount of money affects prices or exchange value for other items. More than 95% of the total amount of money is issued this way.
Issuing a new loan or more credit is not based on contents in other accounts or other valuables present in the bank. The new credit is issued out of thin air, by any licensed bank, either public or private. New "money" is created with the signing of a contract. When the debtor makes a down payment, the amount of new money is reduced, and when a loan is fully paid the account goes to 0. The money created out of thin air "disappears". But the interest paid during the lifetime of the loan remains present, and continuously represents a requirement for more money.
The ones who will generally lose out on this monetary scheme are those who last encountered the additional money in circulation, those living farthest away from centralised finance centres, the ones with low wage jobs, the unemployed, the retired, the poor. The consequence they eventually will notice is that their income and savings will purchase ever smaller amounts of physical goods and / or services. But they seldom or never connect the dots showing this to be a consequence of the increased money supply.
It is mainly the banks themselves and their preferred clients who benefit from the constant increase in the money supply. As a result, there is an ongoing and ever faster transfer of wealth from those who earn least, to those who are considered most creditworthy. This pattern applies to both individual humans and organisations.
There is nothing inherently wrong or immoral with money, debt or interest. Even a fractional reserve monetary system can be functional and beneficial. But the current system needs a lot more attention from critical thinkers, and adjustments.
Roald Ribe - Norwegian Libertarian