In a capitalist social system, the government (including the Federal Reserve), does not have the power to issue money. Private banks and other private financial institutions issue currency and credit backed by the assets that they manage (deposits by consumers and businesses). The assets grow as the economy grows, and the money supply grows with it. To maintain sufficient reserves, the financial institutions enter into voluntary agreements with one another to ensure support in the event of sudden withdrawals threatening the reserves. Without such agreements, they appear risky and so have problems attracting customers. And private deposit insurance companies that insure your savings provide another level of checks on the financial institutions.
Furthermore, under capitalism the government has extremely limited powers to take on debt, and only to finance its valid functions: the military, law enforcement, and the court system. And as we will see in a future section on taxes, not even this form of debt financing may be needed.
With the government out of the picture, the increase in money supply will always be in lockstep with economic growth which means that inflation cannot occur. Protecting your individual rights from government money creation that erodes the value of your earnings and savings, is one of the most important practical benefits of a capitalist social system.
Think Right or Wrong, Not Left or Right 