A few weeks ago I was in a conversation with a professional I respect, a senior executive who runs a significant balance sheet, and he said something I have heard dozens of times: “But James, the banking system is regulated. It is safe. That is what I trust.”
I understand why people believe this. We are told it constantly. The regulatory infrastructure is there. The deposit insurance exists. The central banks are watching. The system is designed to be trustworthy.
I just think we should look at what the record actually shows, rather than what we are told to believe.
Let’s start with the money itself.
The foundation of the centralised financial system is fiat currency: money whose value is decreed by government rather than backed by anything physical or mathematically limited. Central banks hold the authority to expand the money supply at will. This is presented as a stabilising feature. In practice, it is a mechanism for transferring wealth from savers to debtors and from citizens to governments.
The data is not ambiguous. In the United States, the M2 money supply (the broadest measure of dollars in circulation) has grown from $287 billion in 1959 to over $21.5 trillion by 2025. That is a 75-fold increase. Over the last decade alone, M2 has grown at an annualised rate of 12.8%. The purchasing power of cash savings has been systematically eroded, year after year, with no announcement, no vote, and no opt-out available to ordinary citizens.
Lyn Alden, in “Broken Money,” describes this as “the quiet default.” Rather than explicitly defaulting on obligations, governments inflate them away. The nominal number in your account stays the same. The real value declines. Most people do not notice until they try to buy a house, pay for their children’s university education, or retire on savings that should have been adequate.
This is not unique to the US. The British pound has lost approximately 29% of its purchasing power over extended historical periods. In emerging markets, the effects are not quiet. They are catastrophic. Venezuela experienced a hyperinflation rate of 1,698,488% in 2018. In Argentina, the annual inflation rate reached 211%, and companies are now actively allocating treasury holdings to Bitcoin specifically to counteract the peso’s debasement. These are not edge cases. These are the logical endpoint of a monetary system with no hard constraints on supply.
The banking system itself.
Beyond currency debasement, the banking sector operates on fractional reserve banking: the practice of holding only a small fraction of customer deposits in reserve while lending out the rest. This model creates credit, which creates growth, and it also creates fragility on a systemic scale.
The Great Financial Crisis of 2007 and 2008 is the clearest modern case study. Excessive risk-taking, the proliferation of toxic mortgage-backed securities, and the systematic mispricing of risk brought the global economy to its knees. In the United States, the government and Federal Reserve were forced to commit trillions of dollars to bail out institutions that had socialised their losses onto taxpayers while their executives kept their bonuses.
Bear Stearns, one of the most respected investment banks in the world, collapsed over a weekend in March 2008. Lehman Brothers, a 158-year-old institution, filed for bankruptcy in September of that year. Washington Mutual, the largest savings and loan association in US history, was seized by regulators in the largest bank failure in American history. Fannie Mae and Freddie Mac, which collectively underwrote roughly half of all US mortgages, had to be placed into government conservatorship.
These were not small, poorly run institutions. These were the pillars of the centralised financial system. And they collapsed not because of fraud alone, but because the system itself had been structured to allow it.
This is not ancient history. In March 2023, Silicon Valley Bank collapsed, the second-largest bank failure in US history. It held roughly $200 billion in assets. It took 48 hours to unravel. The contagion spread to Signature Bank and First Republic within days. The Federal Reserve had to create an emergency lending facility to prevent further runs. The regulators who were supposed to be watching missed it entirely.
The bailout pattern.
What is most instructive is not the failures themselves. It is what happens after the failures.
In every major crisis, the pattern is the same: the institutions that took the most risk receive the most government support. Shareholders sometimes lose. Management rarely faces meaningful consequences. The employees who caused the problem receive severance. Ordinary depositors and taxpayers absorb the cost of the rescue.
This is not a design flaw. It is a design feature. It is how a system built on fractional reserve banking and unlimited money printing is supposed to work when it fails. The incentive structure systematically rewards risk-taking and socialises losses.
G. Edward Griffin documented this pattern across generations of banking history. The conclusion is not a conspiracy theory. It is an observation about incentive structures. When the cost of failure is borne by others and the reward of risk-taking is yours, you take more risk than is prudent. This is true whether you are a mortgage-backed securities trader in 2006 or a bank CEO in 2023.
It is not just the traditional banks.
I need to address something directly, because it is often used to dismiss the Bitcoin argument: the centralised crypto exchange failures of 2022 and 2023.
FTX, which was presented as one of the most reputable centralised exchange platforms in the digital asset industry, collapsed in November 2022 with approximately $8 billion in customer losses due to fraud and the commingling of user funds. Celsius, BlockFi, and Voyager promised high yields but ultimately collapsed due to gross mismanagement, liquidity crises, and overleveraged positions. These failures have been used to argue that Bitcoin is just as risky as the traditional system.
This argument misunderstands something fundamental. FTX was not Bitcoin. FTX was a centralised intermediary that promised to hold Bitcoin on your behalf. It failed for exactly the same reason that banks fail: it was a centralised institution operating with insufficient reserves, inadequate oversight, and misaligned incentives.
Bitcoin itself did not fail. Bitcoin continued operating without interruption throughout every one of those collapses. The protocol issued its blocks every 10 minutes. The network verified transactions. No depositor who held their own Bitcoin, rather than trusting it to an intermediary, lost a single satoshi.
The lesson from FTX is not “Bitcoin is risky.” The lesson is “centralised intermediaries are risky.” That is precisely the lesson Satoshi Nakamoto embedded in the Genesis Block in January 2009.
The South African dimension.
For those of us operating in South Africa, I want to be specific about what this means.
We hold our savings in an institution that is itself exposed to South African sovereign risk. Our banking system, whatever its individual merits, is subject to the monetary policy decisions of the Reserve Bank, the fiscal decisions of the Treasury, and the political decisions of whichever government holds power. We have watched the rand lose the majority of its value against hard currencies over decades. We operate with exchange controls that restrict our ability to freely move capital to safety.
I am not arguing that South African banks are about to fail. I am arguing that the structural risks inherent in centralised finance are not theoretical. They are real, they are measurable, and they are present in every jurisdiction on earth, including ours. The degree to which those risks materialise varies. The existence of those risks does not.
The alternative is not anarchy.
I want to be clear about what I am and am not saying. I am not saying you should put everything you own into Bitcoin tomorrow and close your bank accounts. That is not a sensible position.
What I am saying is that the case for centralised finance as the default, the safe, the regulated, the trustworthy option rests on a record that does not support that confidence. The money has been debased systematically. The banks have failed catastrophically on a recurring cycle. The bailouts have socialised losses onto the people least able to absorb them. The regulators have repeatedly missed the failures they were supposed to prevent.
The honest response to that record is not to pretend it does not exist. It is to ask whether a portion of your savings might be better held in a form of money that cannot be debased by any central authority, that does not require trust in any intermediary, and that has operated without failure for 15 consecutive years.
That is not a radical question. It is a reasonable one. And the more honestly you look at the record of centralised finance, the more reasonable it becomes.
Not your keys, not your coins. But also: not their keys, not their risk over your savings. That trade-off is worth understanding clearly.
