Deposit insurance causes debt

Without the existence of deposit insurance there would be very much less debt owed to banks. People would borrow less from the banks which would mean there would be less inflation of the currency. The reason deposit insurance tends to lead to more debt is that without deposit insurance (DI) the customers of the bank would be unwilling to lock up their money in the loan. Deposit insurance enables the banks to loan out the customer deposits without any material risk to the customers. But if there is no DI then the customers of the bank might lose their money... certainly for a limited period of time and perhaps forever if the money loaned is not returned. It is because of DI that there is so much debt in the economy. Without DI there would be very much less debt in the economy.