The economy is the process of providing ourselves with the things that we need and want.  Almost everyone on Earth is deeply dependent upon buying the things that they need to live; almost no one can support themselves directly without relying on the products that they obtain through the economy.  If the economy were to collapse, we would no longer be able to get the things that we need to maintain our lives: this would cause great hardship and could destabilise our society.

Our economic system has flaws that make it inherently unstable and liable to collapse.  

Most importantly, the global economy is configured so that it must always grow or it will collapse.  It's not merely useful, or better, or convenient that the economy grows – it's actually fundamental to the way that the economy operates that it must grow.  

As the economy always grows, our use of the resources that Earth and its environments provide for us must also always grow with it.  Earth is a finite system with a finite supply of those resources.  As we use up those resources at an ever-increasing rate, it becomes harder and harder to keep the economy growing as resources increasingly become more difficult or more expensive to obtain.  When we can no longer keep the economy growing, it will collapse. 

Our economy consists of all of the exchanges of products for money, and money for products that we perform as we obtain the things that we need to live.  The money that facilitates these exchanges is created with debt when people borrow money: if no one created debt by borrowing money, no money would exist.  As debts are paid off the money that they create disappears, so new debt must be continually created by people borrowing more money in order to maintain the supply of money, and more people must continually be found who will borrow money.  Because the economy is configured so that it must always grow, the supply of money, and consequently the amount of debt and the number of borrowers must always grow with it.  

Eventually all of the people within an economic community  will reach the point at which they cannot, or will not, take on any more debt.  When this happens, the supply of money and therefore the economy will stop growing.  Because the economy is configured so that it must grow, this will cause it to collapse. 

The money that facilitates the exchanges that comprise our economies is created, with debt, when people borrow money.  Conversely, as debts are paid off the money that they created disappears.  For the economy to maintain its size, more money must be created by people borrowing it, to replace the money that has disappeared as debt is paid off. 

However, when money is borrowed and paid back, extra money must also be paid: this money is the interest on the loan.  This means that not only must enough money must be created to replace the money that has disappeared as debt is paid off, but extra money must also be created to pay off the interest.  The economy must grow by at least enough to allow this interest to be paid back, so the rate that the economy grows must be at least equal to the rate of interest. 

This extra money must be created through new debt just to pay for the interest on all of the loans.  Because all of that extra money goes to pay interest it goes only to the people who provide the loans, not to the people whose work creates the money ; these people are the bankers, speculators, and other investors.   

If the interest rate, and therefore the minimum rate of economic growth, is 3.5% (which is approximately the growth rate of the global economy) then the economy will double in size every 20 years.  This means that in 20 years, an amount of money equivalent to the size of the economy now will go to that group of people.  

This process means that people who already have money can more easily get more money, and the more money that they have, the increasingly easier it becomes to get even more.

This is one of the many reasons why the disparity between the lower end of the wealth range and the upper end of the wealth range increases. This reduces the effectiveness of the economic system, slowing down economic activity; it results in unequal access to the resources of Earth,  causes hardship to a large and increasing proportion of humanity, and consequently results in social instability.

Because the economies must always grow , and because that growth is always facilitated by increasing debt, eventually economic growth must end when no more people can be found to borrow money.  When growth ends those economies must collapse.

This page is linked from:

the issues that humanity faces 

Agree? Disagree? Make a comment!  (Comments are moderated)