The issue isn’t that the money supply can’t grow forever or that there’s a fundamental problem with fractional reserve lending. BUT… the commentator (above) is correct that you can’t you can’t have the money supply (and debt) growing at a greater rate than real GDP forever without blowing yourself up. But so long as it grows in line with GDP you’re not creating a problem. The problem, of course, is that our political system (democracy) doesn’t do a good job of reigning in growth of money and debt. It’s the nature of the business.
We, the U.S., are like an upper middle class family that’s too deep in debt. We’ve got good jobs, a decent education and pretty good fundamental long-term prospects (relative to the rest of the world), BUT… our mortgage and other financial obligations are too big. So, what are we gonna do? Some of the debt’s going to get eliminated (we’ll default on a little bit and inflation will eat some of it). But the vast majority will have to be paid back and that’s going to require two things: spending less and getting a second job. So we’re going to be spending less and working more to pay off that mountain of debt.
So it’s going to be a rough 5-10 years (VERY rough for the next two years) as we get our financial house back in order. But it doesn’t mean that we have to file BK (go into a depression). We just have to buckle down and gut it out. As I’ve pointed out mathematically in a prior thread, we have the economic means to stabilize our household situation and slowly start paying that debt down. The question is whether we have the political will to do so. It remains to be seen.
