When an individual spends money like a drunken sailor this leads to personal bankruptcy and they have to start over from scratch. When a business spends money like a drunken sailor the business is forced to raise prices and if they are not a monopoly then they go out of business or undergo refinancing bankruptcy proceedings.
When a big bank makes too many risky loans then soon it begins working in the red and bankruptcy threatens. The central bank or government can bail a bank out as it did after the real estate bust in 2008 because the bank was considered to be too big to fail. In a national crisis the central bank may take over failing banks and start running them in a more responsible way or permit one big bank to take over most of the remaining ones. There is always a way out of a financial crisis because money is the only issue and the money counterfeiters have all the power.
When the central bank begins to spend like a drunken sailor the national debt increases rapidly, it leads to a financially sick economy of big spenders, and ultimate bankruptcy of the entire financial institution threatens.
A bust after the unrealistic boom of money in circulation is the only cure to the spending crazies in the nation and world. Unfortunately a tightening of the money supply causes many business failures and the economic state of the nation deteriorates rapidly causing massive unemployment and further debt, this time worldwide.
I don’t fear the collapse of the worldwide profligate financial system because debt can be forgiven or refinanced as a solution so the humans in charge of the money supply are really the ones to blame if the world plunges into a worldwide depression. If the world money bags are too greedy and want to consolidate their power even more with a depression then they will and rule more and more of the world by bankrupting profligate individuals and businesses.
Money can be controlled rationally or irrationally and if the world is in a sick financial situation then irrational over speculation is the cause and it must cease or become less prevalent. New money rules may have to be instituted if the current financial system turns out to be a bust.
Banks should make relatively safe loans and incentivize humans to save some of their money for emergencies and retirement with decent returns on savings accounts. They are not doing so today, are encouraging profligate behavior, and are themselves becoming profligate investors of the nation’s money. Irresponsible money management on a small scale is unhealthy procedure and on a big scale it can be catastrophic and result in a hardship depression. I guess it is human nature to wildly speculate when times are good financially but unfortunately a bust is usually around the corner sooner or later as a result of such irresponsible behavior.
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