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Debt-based monetary systems will skew towards ever increasing growth.

• chii 7y ago
  The way I think of it is that in order for debt to exist, interest on the debt must be paid. But to pay interest, you must create more value than the debt you incurred, otherwise you'd not have enough to pay the interest! But the other side of debt is somebody's deposit. So if you summed the debt, it must be equal to all deposit. So from where would the interest come from? It must come from new production. But interest paid become a new deposit (for somebody), and from that new deposit, new debt is created...and hence, require infinite growth to continue to service interest payment.
  • beefield 7y ago
    I think there is something wrong with your premises. There is no rule of law nor nature that interest must be paid. Negative or zero interest are completely possible.
    • chii 7y ago
      but if someone loaned out money to somebody else, you'd expect that they'd ask for interest payment. negative interest rates seems like it's an impossibility (in the sense that only a central bank is willing and able to charge negative rates) for normal commercial loans. And if a bank charged negative rates on deposits (higher than it costs to keep cash safe in a secure safe!), then i suspect people will just withdraw their cash, unless something forces them to keep it in (like the abolishment of cash by central authorities).
      • beefield 7y ago
        In Denmark you can take a mortgage and "pay" negative interest rate [1]. That is, you pay less back than what you borrowed. I fully agree that most people would expect the interest rate to be positive, but their expectation is no rule. Actually I am very sure interest rates have no causal relationship with continuous growth. The one (and only?) thing where the the continuous growth requirement comes from is that most people do not want to be unemployed. That is the choice you need to make. Do you want growth or unvoluntary unemployment? [1] https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-year-mortgages-with-negative-interest-rates.html https://www.cnbc.com/2019/08/12/danish-bank-is-offering-10-y...
        • chii 7y ago
          that denmark negative interest rate is interesting. But it still doesn't quite answer the central issue - who is "giving up" money to lend? The guardian article (https://www.theguardian.com/money/2019aug/13/danish-bank-launches-worlds-first-negative-interest-rate-mortgage https://www.theguardian.com/money/2019aug/13/danish-bank-lau...) only mentions that it's banks passing on negative rates from institutional lenders in money markets.
          • beefield 7y ago
            Sorry, I do not quite understand your question. Anyway, it is ultimately (when you get your head around it, that is...) relatively simple. These institutional investors have cash (well, not exactly cash, but "cash" as in overnight deposits) that they need to invest. some poart of that they want to invest in "safe" instruments, e.g. bonds/commercial papers issued by banks. And it happens to be that they are willing to do that even if they are paid negative interest rate[1]. So the bank pays for its funding say -1.0%. Then the bank can lend the money forward with -0.5% and still make money. [1] Why do they want to do that? If you have a decent amount of money, say millions, and you want to save that for a while to purchase something say next month, you have not that many good alternatives to bank deposits/commercial papers/bonds. Actual cash is surprisingly cumbersome and expensive. Stocks are risky, you may lose quite a bit within one month. Government bonds pay even less. so if your bank says yep, we take your money for a month and pay you back a bit less in a month, you are likely going to swallow it.
          • beefield 7y ago
            Maybe it is worthwhile to note that there is no money[1] that would not be someones loan from someone. Your moeny at the bank account? It literally only is "money" that you have lent to your bank. Cash? A bearer note from the central bank, i.e. a token that says that you are owed by the central bank. [1] As per current typical definitions of money. If you consider gold or e.g. cryptocurrencies as money, then the statement does not hold.
  • modo_mario 7y ago
    >But the other side of debt is somebody's deposit. Not necessarily. Modern banking systems have created plenty of 'money' out of nowhere.
    • BlueTemplar 7y ago
      Yeah, more like "on the other side of someone's deposit, there's X times more debt" - with X being generally allowed to go as high as 20... but the banks routinely break/work around that rule...
  • yohsii 7y ago
    seems like there's never enough money in the system to pay all debt and interest. always requires new loans. a bit broken really
• anton96 7y ago
  Debt-based monetary systems suggests that the supply of money will always grow but if inflation is high that doesn't tell anything about the wealth itself.
• nickik 7y ago
  Any economic system where their is a will to improve lives will skew towards growth. Debt has been a fundamental part of what allowed our society to even talk on this forum, its crazy to me what it reputation is now.
• SkyMarshal 7y ago
  They actually require growth. A debt-based monetary system will eventually default in zero or negative-growth economy. Growth is needed to pay the interest.