Because interest isn't created as new money, to pay it as time goes on, one or more of the following three things has to happen.
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The productive economy has to grow continuously at an exponential rate so that there is sufficient money too pay all of the interest due to the money creation industry.
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The money has to get worth less so that more money is traded for the same amount of goods and services (which we call inflation or an economic bubble), or
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A number of traders on Main Street have to go bankrupt, ceding their assets to the banking sector.
Some of the ramifications of this conundrum:
Exponential growth
In the simple money system described earlier, the money supply increases and decreases with the needs of its users. With our fiat money, because of the need for exponential growth, if growth doesn't occur, inflation or bankruptcies are the result.
It must be understood that the real reason why mainline Economists insist that economic growth is necessary is that with our present money rules, the system will break down if it doesn't grow. Continual exponential economic growth is required by for profit banking with interest. With a properly designed money system, growth is not necessary.
One of the results of this need for growth is that increasingly over time, more resources, both human and natural, have to be used as collateral for loans by turning them into commodities and monetizing them (by borrowing against their value) to keep the monetary system operational. Thus the operation of our money system drives environmental degradation as well as growth.
Scarcity and greed
Another result of the operation of our money system is that even if all traders try to manage their financial affairs carefully, in the long term, some have to fail. In the loan process, remember, only the principal was created as new money. No money was created to pay the interest. T his leads to an underlying dynamic of money scarcity in the productive trading community. This in turn leads to greed - taking care of Number One, even at the expense of others, and the philosophy that more is good, if you can get it.
Scarcity and greed break down community by making a competitive atmosphere in which everyone is competing to get scarce money to pay off their loans with interest and get more stuff. Scarcity and greed, and the resulting disparities in wealth and power between productive traders and financial and money managers, are a result of interest and profit being a part of the rules of our present money system. They are not a necessary fact of life.
Short term thinking
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