sneaking feeling

I have a sneaking feeling that the world economy works only because

1. everyone wants it to
2. it's way too complicated for anyone to work out why it shouldn't, actually - and/or to convince everyone else.

For instance, look at fractional reserve banking. The principle behind it is, say a bank gets a $100 deposit. It can then go and loan out a much larger amount, based on what percentage the central bank/financial regulators require it to keep in its vaults - the fractional reserve requirement; this is typically about 10-15% in most countries. The corollary of this is that when someone withdraws $100 out of a bank, the amount that the bank can loan out shrinks by far more than $100.

Imagine a day when everyone decides to take out their money (a run on the bank). The amount the bank can loan effectively shrinks to zero - although in practice the loans are more often left unrepaid, and the bank goes into insolvency instead. If everyone decided to take out all their money from every bank in the world, we would all be royally screwed.

And oh, foreign exchange. Transaction costs related to foreign exchange probably cost us something like 1-2% of global GDP. (I read that somewhere, just can't remember where exactly.) And besides, where's the logic when if Zimbabwe's government expands its money supply, the value of its currency collapses, whereas if the American government expands its money supply, everyone rushes to buy more US dollars? Other than the fact that US dollars are rather more attractive things than Zimbabwean dollars.

Okay enough ^^ when I think of more I'll let you know.