The Infinite Growth Complex

Modern economies must expand perpetually to avoid collapse. If a country isn’t producing and consuming more this year than it did in the last, this is considered an ominous sign, a signal of an impending crisis. In fact the term “economic sustainability” is traditionally defined as a steady growth in GDP of at least 2% per year. This imperative is completely decoupled from human need.

The more an economy grows, the more energy and resources it consumes, the more trash it produces, the more pollution is released into the water and atmosphere. Habitats are destroyed, species go extinct. The result is environmental degradation at a horrific scale.

Competition for scarce resources breeds war. Never mind how many civilians have to die. Building bombs creates jobs. Conflict contributes to GDP. Self destruction is incentivized.

We live on a finite planet, with finite resources. Infinite growth is not a long term survival strategy. Any proposed solution which fails to address this issue is rearranging deck chairs on the Titanic.

So why must modern economies grow perpetually to avoid collapse? To answer that question we must examine the mechanics of modern money.

Money is the most powerful incentive mechanism ever created, yet very few understand the psychology it utilizes, or the full extent of its impact on society.

Currency has taken countless forms over the millennia: metal coins, cacao beans, notched sticks, pig tusks… In the modern age the vast majority is digital, and has no physical presence at all. No matter what a currency is made of its value is always rooted in scarcity. Money works best when there isn’t enough to go around.

Virtually all modern currencies are debt based. Money is created when ordinary private banks (like Wells Fargo, Deutsche Bank or Societe Generale) loan out money that they don’t have. This practice is not only legal, it is in fact the foundation of the current financial system. It’s called Fractional Reserve Banking. In most countries banks are allowed to loan out 10 times what they hold in deposits.

Banks, when they decide the economy is good, we are optimistic, we are now making loans, they don’t need to wait for any deposits, because when they make a loan they create the deposit. Right there. Banks create money out of thin air. Michael Kumhof - Senior Research Adviser for the Bank of England, and former IMF Economist.

Banks have a license to write hot checks. They literally type money into existence. You on the other hand, must sign over your future labor for that house, car, or education that you couldn’t otherwise afford.

Loans are not free. They must be paid back with interest, and the banks dictate the terms. Over time interest payments far outweigh the principle. The money to pay the interest is not created by the loan. In fact it is never created at all. As a result, there is ALWAYS more total debt than money in circulation.

While banks have a license to write hot checks, everyone else is forced to compete within an insufficient pool of liquidity. There is NEVER enough cash to go around. Bankruptcy is inevitable. The only way to delay the inevitable is to issue more debt (and create more money) increasing production and consumption levels accordingly. Inflation is an inherent side effect.

It’s a spiral, a pyramid scheme, a game of musical chairs. The music keeps playing as long as the credit flows. But the music always stops eventually, and some get left without a chair.

Debt levels expand slowly at first, but inevitably accelerate, then go exponential. Sooner or later it always ends in a crisis.

When credit stops flowing, the money supply contracts, and defaults go through the roof. The banks then seize the real, tangible assets tied to the loans; homes, cars, land, businesses, even government infrastructure. In the end they hold all the cards.

It’s a rigged game that keeps humanity on a hamster wheel, working jobs they can’t stand, selling their life force for digits in a bank account. Modern day feudalism. Equal opportunity enslavement. Artificial scarcity.

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