WHY IS DEBT ESSENTIAL TO THIS MONETARY AND ECONOMIC SYSTEM?
Because money is created by issuing debt, without
debt there would be no money. In fact, when you repay your debt to a bank, you
have destroyed money. The bank no longer has an asset in reserve, your debt,
and so it must find a new borrower to take on new debt or borrow (allow some
other financial institution to create money via debt) to maintain its reserves.
New debt must constantly be created in order to replace debt which is retired,
either by payment or default, or the money supply would shrink. We will look
at what happens when the money supply shrinks too much on the next page.
The economy needs growth to compensate for inflation and gains in productivity. As time goes on, assets like land and buildings cost more to purchase or build, raw materials also rise in price, and therefore companies need to charge more for their goods and services or lower the wages paid to their workers. If a company relies entirely upon robots, or benefits from increasing productivity due to computers or improved systems or workers who know their job better and better each day, the resulting savings in payroll will translate into fewer dollars available to purchase the goods and services available, driving down prices due to the lower demand from consumers. Thus if the workers are being paid less, and can’t afford to buy as many goods as last year, debt is essential for increasing demand to offset inflation and salary reductions. If consumers can’t borrow to buy, the economy will shrink and enter a downward spiral of decreasing prices, decreasing wages, and decreasing demand. This notion of “degrowth” is so abhorrent that we don’t really have a word for it in our language.
Please move to "Why debt is problematic (systemic)" next.
Please move to “Why is debt problematic (systemic)” next
lding relationships that will one day come back to serve us in our own time of need? Wouldn’t this way of doing business, following a debt jubilee, make your heart sing?