Thursday, June 17, 2010

Financial crash is cyclical, but end of oil may be final

...Why did we choose a debt based monetary system given that it is mathematically required to collapse at some point? The answer is that a debt based system maximizes the rate of economic growth by borrowing from the future. Standards of living, corporate earnings, and government power increase at the fastest rate possible which keeps the public, businesses, and leaders happy. A debt based system also makes it easier for governments to run deficits which helps to re-elect leaders by providing citizens with something for nothing. And citizens have more access to credit for consumption which enables them to live beyond their means. Finally, banks are able to make a lot more money with a debt based system so they were motivated to promote the adoption of the system. When we created our debt base system no one imagined that humans would ever be able to exceed the maximum possible extraction (and waste absorption) rates of natural resources. The system has worked well for us over the last century because we have not experienced any physical limits to growth. Of course the earth’s ecosystems and other species have taken a severe beating by our increased use of natural resources but that is a topic for another paper... Kye Bay on the Oil Drum

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