NIce one Gail, but I wonder personally if debt is the issue: to me its just a symptom.
If you take economies as pure systems, then they have natural feedback and feedforward paths. Debt is a way – especially debt based on notional, rather than actual, security – of trading notional surplus today for increased prosperity tomorrow: That is, it is a hugely effective way of accelerating growth in a system that is not resource limited.
IN a system that is resource limited, where no growth is physically possible, spiralling debt merely reflects an attempt to engender growth where none is available. Debt itself is not the problem, its merely a symptom of the problem, associated with the fact that governments financial institutions and so on, are desperately trying to create the growth they need to balance their books, when it cant be done.
Debt is conceptually easy to solve. simply devalue it by 10 or so. All savers lose 90% of their savings, all borrowers lose 90% of their debt. Wealth gets transferred from lenders to debtors. That’s largely what debt ridden governments have done with QE et al.
rune66 on 05 Sep 14Abstract: This paper postulates the existence of a growth imperative in capitalist economies. The argument is based on a simple circular flow model of a pure credit economy, where production takes time. In this economy, positive growth rates are necessary in the long run in order to enable firms to make profits in the aggregate. If the growth rate falls below a certain positive threshold level, firms will make losses. Under these circumstances, they will go out of business, which moves the whole economy into a downward spiral. According to the model presented, capitalist economies can either grow (at a sufficiently high rate) or shrink if the growth rate falls below the positive threshold level. Therefore, a zero growth economy is not feasible in the long run.
