Aside from being fascinated, I felt worried after having watched the Arithmetic, Population, and Energy lecture by Bartlett – see my last posts. But there was still something unclear to me, and that is why we continue to celebrate and aim for growth if the consequences will be so devestating. I mean: we could start being happy with what we have instead of always wanting more, right? (I know I’m neglecting human psychology and economic inequality here.)
Martenson’s explanation of the money system gave me a missing piece of that puzzle. What he explains in part six, seven and eight of his Crash Course series, is that our money system is based on perpetual exponential growth, and that without this growth the system will collapse. This is because the system is based on debt: our money is lent into existence. And to be able to pay the rent for all these debts, each year all outstanding debt must grow (‘compound’) by at least the rate of interest on that debt. So perpetual growth is a requirement of our money system and modern banking. If this growth stops or goes negative for too long, people and companies will default on their debts and the system will collapse. Ever wondered why governments are pumping so much money into the system right now, and urge remaining banks to lend out money? Right.
Watch the following episodes for a much better explanation than I could ever give:
Part 5 – Growth versus prosperity (ca. 4 minutes)
Part 6 – What is money (ca. 6 minutes)
Part 7 – Money creation (ca. 4 minutes)