Oh yes. There are safeguards…. in some countries. But they aren’t perfect because we can’t think of everything that could mess up the system.
In Africa, the leaders often don’t understand economics. They think if they print money, then there is more money. Unfortunately, the real value is the things that people make and do, and that doesn’t change, no matter how much money you print. So if I have ten dollars and that equals all the stuff I make. Then I print 90 more dollars so I now have 100 dollars. It still equals all the stuff I make. But now each dollar is worth a tenth of what it was when there were only 10 dollars in existence.
What is necessary to keep it all stable is confidence. It works when we all have confidence in it, and when we lose confidence, the economy suffers as people no longer believe that what they do and make will be accurately reflected by the currency.
So, in the recent mortgage crisis—people believed the mortgages were worth so much, and that was all backed by property worth a little more. But it turned out that the people had borrowed more than they could pay, and their houses had been overvalued to justify those mortgages, and so it collapsed, together with our confidence in mortgage bankers.
Now, to regain confidence, we need to slap stricter rules on the bankers to make sure they don’t fuck it up again. If they want to cheat, they’ll have to do it in a new way. And believe me, eventually they will find that way. But we hope the rest of the system is solid enough (with enough confidence) that the harm will be minimal.