The economic system as we know it today is structured to collapse
The
Consequences of Debt Creation of Money
Nasim
Beg March 2026
The
modern-day wisdom is that money must only be created through debt and that too
exclusively by privately owned banks, while the central bank’s role is to
attempt regulating the amount of money in circulation through regulating the
interest rates and the use of a few other tools.
The acceleration of the process of the
unsustainable monetary creation system can probably be attributed to the USD
moving away from being anchored to the gold standard about fifty years ago,
while it continued as the de facto currency of the world.
Data
The global nominal GDP (size of the
world economies) grew from $11.45 trillion to $117.2 trillion, i.e., by 10.2
times over the fifty-five years, while global debt grew from $12.5 trillion to $348
trillion over that period, i.e., 27.8 times in size.
Along-with this, the financial
services extracted twice as much out of the productive side of the economies as
compared to its extraction fifty-five years ago (8% of the world GDP versus 4% fifty
years ago).
The acceleration of inequality
The financialisaton of the economy is
a major driver of inequality, at an accelerating pace being applied to
Piketty’s R>G.
Debt would have to grow into perpetuity:
However, inequality is not the only
consequence; the way the system is structured, in the event there is an attempt
at reducing the aggregate debt, it will amount to the reversal of creation of
money, i.e., the aggregate money in circulation will go down, creating
recessionary pressures. Since we need the aggregate money in circulation to
grow in line with economic growth required to improve the living standards of
several billion people around the globe, debt will have to grow into
perpetuity, that too at a higher pace to accommodate the extraction of interest
on debt.
The imminent collapse
As the fifty-year data indicates, it
would be accompanied by an accelerating growth in the rate of extraction by the
financial investors out of the productive sectors; thus, at some point in time
the proportion of this extraction will overwhelm the productive side of the
economy, leading to a collapse of the world economic system as we know it
today.
This means that if there is any attempt to reduce the aggregate debt, that decreases the creation of new money; hence, it will consequently result in breaking the sustaining relationship between debt and created money and thus in the reduction of extraction of real money created through production of commodities. So what is needed is a reduction in the debt? Khalil
ReplyDeleteWhat we need is for the Soverign to create money, ans needed but under parliamentary discipline. and stop its creation through fractional reserve banking.
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