Questions I’ve carried since the 1990s.
My concerns about money, debt, and the direction of our financial system go back to the 1990s. Those questions are part of what led me to explore cryptocurrency.
I’m sharing that journey because understanding the money we already use is a useful starting point for understanding Bitcoin. Read, question, compare sources, and make your own decisions.
— Ruben Zuniga, founder of Cryptocurrency Basics
Does all money come from a printing press?
No. Much of the money people use is held as bank deposits. When a commercial bank makes a loan, it generally creates a matching deposit in the borrower’s account. The borrower has spending power and a debt; the bank has a loan asset and a deposit liability.
Repaying the loan’s principal reverses that deposit creation. Banks cannot lend without limits: capital, regulation, funding, credit risk, and demand for loans all matter. Central banks also create reserves used within the banking system.
Calling money “debt-based” describes an important part of this system, but it does not mean every dollar is a Treasury bond or that borrowing automatically creates real wealth.
Read the Bank of England’s money creation explainer →Fractional-reserve banking: where does the extra money come from?
Banks do not keep a dollar of cash or central-bank reserves for every dollar customers have on deposit. This is commonly called fractional-reserve banking. Reserves are different from capital, the bank’s financial cushion against losses.
New deposit money can be created through a bookkeeping entry when a bank makes a loan. This is what people often mean by creating money “out of thin air.” The bank simultaneously records a loan it expects to collect and a deposit it owes the borrower. The new balance is spendable money, but it is matched by debt and obligations.
The familiar $1,000-to-$10,000 example
In the simplified textbook model, assume a 10% reserve requirement, an initial $1,000 cash deposit from outside the banking system, every loan fully redeposited, no cash withdrawals, and no extra reserves held:
| Round | Deposit | 10% retained | Loan |
|---|---|---|---|
| Bank A | $1,000 | $100 | $900 |
| Bank B | $900 | $90 | $810 |
| Bank C | $810 | $81 | $729 |
If the process continues under those assumptions, total deposits across the system approach $10,000: $1,000 ÷ 0.10. Total new loans approach $9,000. Bank A’s first loan in this model is $900—not $10,000.
How does that compare with banking today?
The Federal Reserve reduced U.S. reserve requirement ratios to 0% effective March 26, 2020. The old 10% multiplier is therefore not a current U.S. lending rule. Zero required reserves does not mean banks hold no reserves or can lend without limits.
Modern money creation does not follow a mechanical chain of banks lending out earlier deposits. Banks create deposits when lending, while managing capital, liquidity, settlement payments, credit risk, and regulatory requirements. Your $1,000 deposit does not automatically authorize a $10,000 loan.
Federal Reserve: reserve requirements →
Bank of England: why the simple money multiplier is incomplete →
What really happened at Jekyll Island?
In November 1910, a small group of banking and government figures met secretly on Jekyll Island, Georgia, to develop a banking reform proposal. Their work helped lay the foundations for the Federal Reserve. Congress established the Federal Reserve System in 1913; the final legislation differed from the original proposal.
The book that raises the questions
G. Edward Griffin’s The Creature from Jekyll Island presents a critical interpretation of central banking. The meeting is documented history. The book’s broader conclusions should be evaluated as arguments, with evidence checked against historical records and other scholarship.
Ask: Who shaped the proposal? What problems were they trying to solve? Who benefited, and what checks on power were adopted?
Read Federal Reserve History’s account of the meeting →Why doesn’t a dollar buy what it used to?
Inflation means the overall price level rises. When income or savings do not keep pace, their purchasing power falls. For example, if a basket costs $100 today and $103 a year later, buying the same basket takes 3% more dollars.
Money and credit conditions matter, alongside demand, production costs, supply disruptions, and expectations. A rise in one price is different from a broad rise across the economy.
Bitcoin’s limited supply attracts people concerned about monetary expansion. That does not make its market price stable or guarantee that it will protect purchasing power over any particular period.
Explore the St. Louis Fed’s introduction to inflation →What does “reserve currency” mean?
Central banks hold foreign currencies and related assets as reserves. The dollar also plays a major role in global trade, borrowing, and payments. That international demand benefits the United States.
Its position reflects several factors, including the size of the U.S. economy, deep financial markets, institutions, and established trading networks. Military strength alone does not explain it. Reserve status can evolve; it does not give a currency a fixed expiration date.
Read the Federal Reserve’s research on the dollar’s international role →Why was Bitcoin invented?
Satoshi Nakamoto’s 2008 whitepaper proposed electronic payments directly between people, without relying on a financial institution to prevent double spending. The network launched in 2009.
Bitcoin’s current consensus rules limit issuance to approximately 21 million coins. No central bank sets its supply. Holding bitcoin directly is different from owning a company’s promise to repay you.
That difference comes with responsibilities. Self-custody puts key security in your hands; using an exchange adds reliance on that company. Bitcoin still faces price, technical, and operational risks. Other cryptocurrencies have different supply rules and may depend on issuers or reserve assets.
Scarcity is a design feature, not a promise of investment returns.
Read Bitcoin’s original whitepaper (PDF) →Explore Bitcoin’s supply rules and risks →
Understanding comes before investing.
You can explore these ideas without purchasing crypto. Start with how the technology works, then learn about wallets, custody, and scams.
Discuss your questions with neighbors in the Coastal Bend. Skeptical, curious, or experienced—you are welcome.
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