Debt based monetary system is a kind of economic system where private banks supply money to the economy using the fractional reserve banking system. This form of monetary system is debt-based because as a condition it is required to be paid back at some point in the future. Some people also argue that as this debt must be repaid back with interest, the debt can never be repaid unless more money is created through the same process.

Millions of people all over the world have lost most of their retirement savings to their debts. Corporations and individuals have gone bankrupt and people have lost their jobs and homes due to the fact that they could pay off what they borrowed. That is why many countries have made a planed debt based monetary system. Canada is one of the world's largest debt based monetary systems, controlled and managed by bankers rather than sovereign governments. Government Issued currency is not like the debt based monetary system where money is issued by the private bank and is also not required to be returned at a fixed point of time.

Economist and political commentators believe that debt based monetary system sometimes amounts to a certain form fraud that fetches money out of nothing. A number of monetary reformers think that this form leads the economy to an inexorably indebted consumerism.

The debt based monetary system has the cyclical side effect which is caught at end of the business cycle. This system suffers most, as contraction in the growth of credit slows the economy just as these newly indebted businesses and consumers find they have been left out of the growth cycle in debt creation.

Countries with lower population growth and aging people, undertakes debt based monetary system which in the absence of strong and effective redistributive monetary system there will be a systematic concentration of wealth. It is also been predicted that in the developed countries there will be an increased incidence of financial crisis. Some of them even go to the extent that there might be a severe political crisis as well.

It is said that debt based monetary system will fetch the gold standard, a fundamental change in the way money is produced and distributed - or a complete financial "meltdown" as fewer young people in developed economies can be found who are willing to go into debt in sufficient magnitude to pay off the debts that have already been accumulated. If extreme inequality increases, foreclosures rises and financial crisis erupts and results a political crisis as well.

Every one wants to succeed in business but debt based monetary system is always not the process. The better the banks, building societies and lending institutions do, the more debt is created. But there is a different way as well, it is an equity-based system and one in which those businesses can play a responsible role. The government must grasp the nettle, accept their responsibility for controlling the money supply and help to come out from debt-based monetary system.