Under our fractional reserve system the money supply is equal to debt. To increase money in the system more debt has to be issued. To allow for interest to be paid on the debt (back to the bankers), the debt issued every year has to be equal to the principle issued plus interest, otherwise the system will be short the interest portion to pay the debt. So the Fed has a target of say 3% money growth to cover the interest portion. The average bank uses 11 to 1 leverage (for discussion sake). For every 1 million in equity they can loan out 11 million in deposits. A 10% decline in their portfolioâs results in a 110% (11 X .10 = %110) decline in their equity. Most banks require money down for a loan or the borrower to have âskinâ in the game so small decreases in collateral value arenât ruinous to the bank; but when that margin is exceeded, like is currently the case with most housing loans and commercial real estate, then banks have to raise equity to compensate or reduce loans, or both. Most, if not all, banks are bankrupt in the U.S. and probably abroad as well. Through accounting rule changes and more liberal enforcement policies, the appearance of a healthy banking system is foisted upon society by the government and the media. This policy does buy time for things to heal, but if they donât, and they arenât it appears this time (see money growth statistics), then the risk of system collapse is imminent. If the above is true, which it is, then how does the Fed (which is a private entity by the way) and the US government counter the imminent collapse of the fractional reserve banking system that will occur in the next couple years? My opinion is that there are only two moves left if we are to maintain this banking system: 1) nationalize the banks and remove the fear of collapse from the people, and 2) remove hard currency from the money supply and force it into electronic âcreditsâ which must be stored at a participating US bank to transact business on the âFedâ system. I hypothesize nationalization will happen first and removal of the hard currency second. Down the road (but soon) weâll go from smart cards to embedded chips or bar codes embedded or affixed on our bodies. Eventually you wonât be able to buy or sell without being on this system and it will spread worldwide. The governments will treat like criminals those that setup bartering in goods or try to work outside the system.