Is this principle also applicable to the governments?
Once you understand how fractional banking works then you'll understand how and why the economy took a big nosedive. Digging deeper will also show you that the system that was created with the Federal Reserve was designed to back big banks with taxpayer money and perpetual debt. When gold finally became unpegged from gold, it opened the doors to this financial boondoggle. The natural regulator is money backed by something of value like gold. You can't just create gold money out of thin air like you can fiat money. Read the book "The Creature from Jekyll Island". It's the story about how the Fed was created under the guise of protecting the economy when in reality it was about reducing competition and increasing profit. It's pretty obvious they haven't done their job of protecting the economy.