2  The Current Economic System

A Rigged Game

Every day, millions wake up, go to work, and try to get ahead financially. Yet no matter how hard they work, inflation eats away at their savings, debts pile up, and financial freedom remains elusive.

The world’s economy appears to be a hive of activity—banks issuing loans, stock markets fluctuating, and businesses growing. But beneath this surface lies a rigged game. While a small minority accumulates vast wealth with ease, the majority remain trapped in cycles of debt, rising costs, and financial uncertainty.

How did we get here? Why does it often feel like no matter how hard we try, the system always works against us?

This chapter exposes the root problems in the modern financial system, showing how fiat currency1, riba2 (interest), and exploitative capitalism have created an economy that benefits a privileged few while keeping the majority in perpetual struggle. By understanding these flaws, we can begin looking for real solutions—ones that don’t just help us escape personally, but also provide a better economic foundation for future generations.

What Is Money?

Most people use money every day, yet few stop to ask: What is money, really? Is it just the paper bills in your wallet, or the numbers in your bank account? What gives it value?

The Three Functions of Money

Traditionally, money serves three essential functions:

  1. Medium of Exchange
    Money allows people to trade goods and services without needing direct barter. Instead of trading a goat for wheat, you can simply use money.

  2. Unit of Account
    Money provides a universal way to measure the value of different goods. A bushel of wheat might cost $10, while a motorbike costs $1,000. This standardized pricing makes transactions more efficient.

  3. Store of Value
    Ideally, money should preserve purchasing power over time. If you save $100 today, you expect it to buy a similar amount of goods in the future.

For centuries, gold and silver served as the foundation of money because they had intrinsic value. A gold coin held the same worth no matter where you traveled. But over time, governments sought easier ways to expand their economies. Instead of carrying physical gold, they introduced paper money backed by gold reserves—allowing for easier transactions.

Eventually, governments removed the gold backing altogether, replacing it with fiat currency—money that holds value only because the government says so. While this system made money easier to manage, it also gave central banks unchecked power to print more currency whenever they wanted.

Fiat Currency: A System Built on Inflation and Debt

Fiat currency is money declared legal tender by a government but not backed by a physical commodity like gold or silver. Its value exists purely because people trust the government that issues it.

This system fundamentally changed the rules of money:

  • Central Banks Control the Money Supply
    Governments and central banks can print money at will, expanding the money supply without increasing actual wealth.

  • Inflation Becomes Inevitable
    When more money is printed without a corresponding increase in goods and services, prices rise. What cost $100 last year might cost $110 this year.

  • A Hidden Tax on Your Savings
    Inflation slowly erodes the value of money, acting as a silent tax that steals wealth from savers and benefits those who can borrow at low interest rates—typically banks and wealthy investors.

  • Encouraging Debt Instead of Wealth
    Because fiat currency loses value over time, people are pushed toward investing or borrowing just to keep up. Those who save in cash lose purchasing power, while those who borrow at low interest rates gain an advantage.

In a riba-free system, money would represent real value, backed by tangible assets like gold, land, or staple goods. But in a fiat-based system, money is created out of thin air, leading to cycles of boom, bust, and endless borrowing.

Fractional Reserve Banking: How Banks Multiply Money Out of Thin Air

Fiat currency alone is problematic, but when combined with fractional reserve banking3, it becomes even more dangerous.

What Is Fractional Reserve Banking?

In a fair system, banks would only lend out money that they actually have. But in the modern banking system, banks lend out far more than they hold in deposits, creating money that never existed before.

Here’s how it works:

  1. A person deposits $1,000 in a bank.
  2. The bank is only required to keep a fraction (e.g., 10%) of that amount in reserve.
  3. The bank lends out the remaining $900 to another borrower.
  4. That borrower deposits the $900 into their own bank account.
  5. That bank keeps 10% ($90) and lends out the remaining $810 to someone else.

This cycle repeats, multiplying the original $1,000 deposit into $10,000 or more in new loans—money that was created out of thin air.

How Fractional Reserve Banking Amplifies the Problem

Printing money alone isn’t what drives the real explosion of debt—it’s how banks expand the money supply even further through fractional reserve banking. This process allows banks to multiply fiat money, issuing loans far beyond what they actually have in deposits.

  1. Artificial Money Creation Leads to Inflation
    Every time banks issue loans, they effectively create new money, expanding the total money supply without producing real economic value. More money chasing the same amount of goods causes higher prices, meaning your savings lose value over time.

  2. Debt-Based Growth Instead of Real Wealth
    Since most new money enters the economy as debt, economic growth becomes credit-driven rather than based on real productivity. Instead of wealth being tied to land, resources, or labor, it becomes reliant on an ever-expanding cycle of borrowing.

  3. Financial Crises Become Inevitable
    Banks lend out more than they hold, making them highly vulnerable to bank runs—where too many depositors try to withdraw their money at once. When confidence in the system crumbles, the entire economy can collapse, as seen in the 2008 financial crisis.

  4. Perpetual Riba Dependency
    Because banks profit from interest on loans, they have an incentive to lend indefinitely, trapping individuals, businesses, and even governments in cycles of riba-based debt just to keep the system afloat.

  5. The Wealth Gap Widens
    Wealthy individuals and corporations own assets like stocks, real estate, and businesses, which rise in value due to inflation. Meanwhile, salaried workers and the poor, who don’t own assets, see their purchasing power decline year after year. This locks millions into financial struggle while the privileged few benefit from the system.

Why This Makes Escaping the System So Difficult

Because money is created through debt, escaping the riba-based system is extremely difficult:

  • If you refuse to borrow, you fall behind in an economy where everyone else is using credit to buy homes, start businesses, or invest in assets.
  • If you do borrow, you become enslaved to interest payments that keep you working just to pay off debt.
  • Meanwhile, inflation ensures that saving cash is not a viable solution, as your money loses purchasing power every year.

This is why simply earning more money or budgeting better isn’t enough. The system itself is designed to keep people trapped. Understanding this reality is the first step toward finding a way out—one that rejects both riba and artificially inflated debt.

The Riba Trap: How Interest Enslaves People

Imagine you take out a 20-year mortgage for $100,000 at a 5% interest rate. By the end of the loan, you’ve paid over $193,000—almost double what you borrowed. And if you miss payments? The bank takes your home.

This is the riba trap—a system where lenders profit effortlessly, while borrowers work for decades just to repay loans that keep them financially enslaved.

But the reason riba is so pervasive isn’t just because banks charge interest—it’s because the entire financial system, built on fractional reserve banking, ensures that every loan, every credit card, and even government borrowing fuels the cycle further. The more people borrow, the more money banks create out of thin air, expanding the money supply and driving inflation. This forces even more people and businesses into borrowing just to keep up, creating an endless loop of debt, interest, and dependency.

The Prophet Muhammad (SAW) warned:

A time will come upon the people when there will be no one left who does not consume riba, and whoever does not consume it will still be affected by its dust.” (Abu Dawood 3331)

Today, riba is everywhere:

  • Mortgages force people into 30-year repayment cycles.
  • Student loans keep young professionals in debt for decades.
  • Credit cards charge interest that grows faster than most people can pay.

Even governments are trapped. As national debt balloons, entire populations must shoulder the burden through higher taxes and austerity measures.

Why This Matters: A Spiritual and Practical Crisis

Understanding the system’s rigged nature isn’t just about finances; it’s also about integrity, community well-being, and spiritual tranquility.

  1. Spiritual Toll
    Engaging with riba-based transactions can create inner conflict, leading to guilt, anxiety, or a sense of moral compromise.

  2. Material Bondage
    Most people spend their lives paying off interest-based loans, limiting their ability to pursue personal growth or contribute to their communities.

  3. Inequitable Societies
    When wealth concentrates at the top, poverty and desperation increase, creating an economy where the rich get richer while the poor struggle just to survive.

Recognizing the rigged nature of the system is the first step toward change. If we can see the flaws—fiat currency overprinting, riba-based lending, inflation as hidden taxation—we can begin seeking or building alternatives that promote genuine prosperity.

Moving Forward

With a deeper understanding of how the modern economic system is stacked against everyday people, you’re now prepared to explore the riba-free path. Future chapters will detail:

  • How to shield your assets from inflation and interest-based traps.
  • How to invest ethically in collaborative ventures that reward genuine effort instead of exploitation.
  • How to share wealth responsibly, creating an economy that benefits everyone—not just the financial elite.

Breaking free from riba isn’t just about individual escape—it’s about building a system that empowers entire communities. The next step is understanding practical strategies to achieve financial independence without compromising your values.

If the system is designed to trap you, then knowledge is your greatest tool. The next chapters will show you how to reclaim control—how to store your wealth safely, invest without falling into riba, and build financial security rooted in justice and real assets.

Take a deep breath—the journey starts now.

  1. See Appendix A: History of Modern Fiat Currency↩︎

  2. See Appendix C: The Modern Reality of the Prophet’s Warning About Riba↩︎

  3. See Appendix B: How Fractional Reserve Banking Works↩︎