Basics of Trading and Finance (Part 16) : Solution to the Problem of Fractional Reserve Banking with Cryptos (Two Major Problem of Modern Economic System)
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Intro
IntroAs a moderator of the Tron Fan Club community, I regularly write various tutorials on crypto blockchain and Tron related matters. The main purpose of these tutorials is to make our new users aware of these topics. In continuation of that I am writing tutorials on trading and finance. Hope you can easily learn some details of trading and finance through this tutorial series.
The world economy is going through extreme stress. One of the major weaknesses of dollar or fiat based economic systems is the lack of corresponding backup when printing fiat. Just as gold backup is not being maintained, foreign currency reserves are not being maintained in the central banks of the world. It is not only the central banks of different countries but the Federal Reserve does the same. Where everyone thinks the Federal Reserve prints dollars with gold backup and banks in other countries print fiat by holding foreign currency reserves as needed. But in reality this information is not true as the dollar has become a paper currency since the Nixon shock in 1971. And in this continuation, the central banks of other countries do the same. This is one of the major weaknesses of the current economic monetary system.
Another major disadvantage is that when central banks print currency, they lend those notes to various institutions such as governments, banks, corporates or individuals. So when the notes printed by them come to various parties in the form of loans, those parties have to pay back a large amount of money with interest. Since there is not enough fiat currency in the market and it can only be printed by the central bank, these parties cannot pay it. Because of this some people or institutions become defaulters. They have to make new loans and print new fiat currency to do so. In this way, the debt burden of a community or country becomes heavy. Thus the economic system continues to be another major weakness of the current financial or economics sector with such load based fiat system.
In today's post I discussed only 2 problems. I will discuss some more issues in the next post. In the following posts, I will try to highlight some examples of these problems, their implications and how they can be solved through cryptocurrencies. I intend to explain this topic in tutorial form in 5 posts. Thank you
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