[quote=Allan from Fallbrook]Underdose: A series of excellent posts, thank you.[/quote]
Thank you. Very kind. I’m also deeply grateful for your concrete elaborations. It really helps drive the point home.
[quote=arraya]Money is essentially an abstraction and not constrained by the laws within which material and energy systems must operate. In fact money grows exponentially by the rule of compound interest. Growth based models in finite spaces will fail by definition. They will become canabilistic and unstable before collapse.
A monetary system based on infitite debt growth is not rational. Not even in the ball park.
The invisible hand is a silly superstition on par with santa clause.[/quote]
arraya, I’m puzzled by a couple of things you say. Money grows by compound interest strikes me as an odd claim.
Suppose there is a Lender named Lenny, and a Borrower named Bob. Lenny lends Bob $100 at 10% interest. At the end of two years, Bob owes Lenny $121 dollars. Compound interest at work.
There are essentially two possible extreme outcomes (and degrees in between). 1). Bob pays back in full. 2). Bob defaults.
In scenario 1, Lenny is -$100, +$121, Bob is +$100, -$121. Add it all up, the sum is zero. Net, Lenny +$21, Bob -$21. Money didn’t grow, it just changed hands.
In scenario 2, Lenny is -$100, Bob is +$100. Again, sum zero. It doesn’t matter that Bob may have spent the $100. It transferred from Bob to someone else, maybe Sal the Supplier. Lenny -$100, Bob +$100, -$100, Sal +$100. Still zero. The compound interest only existed on paper and was never paid.
Compound interest only transfers purchase power from one entity to another, it does not make the money supply grow. Right now the US government is on the wrong side of compound interest, transferring purchase power to our creditors.
I’m also with patientrenter concerning your invisible hand/Santa Claus claim. It’s a rather empty dogmatic claim. No one claimed there really is a magical invisible hand. It’s a metaphor, not a myth. My example above of the housing bubble absent government intervention shows the metaphorical invisible hand at work. A shortage of loanable funds causes interest rates to rise, encouraging savings and squeezing out would-be borrowers. The “invisible hand” is just an idiomatic way of describing market forces. Are you suggesting market forces are comparable to Santa Claus? You astutely observe that oil will run out, and when it does (barring we’ve gotten off our oil addiction with alternatives before that day) the price will go through the roof. The “invisible hand” of the oil shortage will stifle consumption by making it prohibitively expensive. Will you call it a myth on that day?
