So bank accounts must be as indistinguishable from their deposited money as any such concrete representations are indistinguishable from the money they represent. Hence two deposits in different accounts being always different money, even if one is just a loan of money from the other: when depositing money borrowed from one account into another, people must duplicate that money, by mistaking it for both accounts.
Additionally, since all money created by commercial banks remains as just balance fractions borrowed from their client accounts, that money must be worth only as credit, or as the corresponding debt principal. This way, except for money neither in reserves nor loans — and possibly not even in bank accounts, thus not being excess reserves — but not from loans, bank loans are the only money supply left for paying their own interest. Consequently, such an interest-paying, self-indebted money supply must grow at least at its own interest rate less any other money also excluded from bank reserves: eventually, whether as loans or not, the total money supply must increase exponentially.
However, who does then create all needed new money? Before central banks, governments would have done it. Later, each new central bank has created ever-increasing amounts of that money on behalf of its government. Indeed, since the source account of any bank loan could have been the target account of other such loans, from which it would be then indistinguishable, banks can always replace that source account by debt instruments, including some representing a public debt. So by becoming central banks, they can create new account money in exchange for promises from their governments of paying it back with interest, essentially the same way they replicate part of that money in exchange for promises from their commercial clients of paying it back with interest. However, paying the additional interest on this new money, now created as a public debt will demand still more money. Then, the same banks will — as they always did — create ever more money from new public debt for paying interest on both private and old public such self-indebted money. This way, all new money created as a private or public, interest-paying debt must recursively amplify any lack of itself initially solved by central banks creating still more of it.
The result is an exponential growth both of the money supply and the debt it represents, then a proportional, ever larger transfer of exchange value to the banks through inflation and interest payments, respectively, which must collide with social-resource limits. Constructively delaying this collision depends on a corresponding increase in the social production of wealth, which must rather collide with natural-resource limits.
Are there any alternatives to such an unsustainable economic system?
Abstractly Represented Money
Unlike the symbol for a verbal sound, its audible self cannot become indistinguishable from what it means. For example, the sound of the word “everything” cannot already be everything and still mean it. Unlike its visual representation, that sound is not recognizable independently of meaning something else, from which it hence must always be distinguishable.
Still, verbal sounds are not the only meaningful entities always necessarily distinguishable from their meaning. There are also public representations of a privately known entity. For example, the number three could represent a single, just possible number to every person while representing the actual number five only to Joe.
Then, people could publicize a number (like five) as referencing another, private one (like three) without ever publicizing this private (the five-like) number as conversely referencing that public (the three-like) one. Public-key cryptography does precisely that: it uses two numbers or keys of which, although either number means the other, only the private key can reveal its corresponding public key. This way:
- Any content encrypted using the public key can only be decrypted by someone who also knows the private key.
- Any content signed using the private key can still be authenticated by someone who only knows the public key.
Using public-key cryptography, people can finally avoid privatizing their public representations of money, by representing any exchange value as a private key then representing this private key, or metarepresenting its represented value as the corresponding public key. For example, the Bitcoin decentralized network uses public-key cryptography to build signature chains, each link of which represents a balance transfer, or transaction. In Bitcoin, transferring the balance of one public key to another consists in combining the target key with the transfer that resulted in that balance, then signing this combination with the source private key. After which, any holder of the source public key can authenticate this new transfer as originating from whoever could sign it — necessarily by holding the source private key.
Then, money becomes a privately-signed yet public transaction chain despite never becoming itself public. For the first time in history, representing an exchange value (as a private key) does not require privatizing its publicly representing object (the corresponding public key). With such a metarepresented money, or metamoney, a public abstraction (a public key) can represent an exchange value (that of a private key) without ever becoming itself private — which makes its privatized control by any public authority not only unnecessary, but also impossible.
Indeed, publicly expropriating money, whether by selling, buying, creating, or destroying it, requires privately controlling its publicly representing object, which then must be concrete. On the contrary, abstractly representing that money prevents all privately public authorities from having any control of its representing object, then from necessarily expropriating an increasing fraction of its exchange value. While conversely, to avoid this privately public, hence increasingly expropriating control, each object representing money must be abstract — like a public key.
Finally, to be centralized — in a government or central bank — a public monetary authority must privately control what represents money, which then must be a concrete object. While conversely, to control an abstract representation of that money, this public authority must become decentralized — in a metamonetary system, like Bitcoin.