Look at the US for the same time period. Looks the same doesn't it? Have we not increased our energy use? These figures are in quadrillion btu's. Hard to draw arguments that hold water from these charts for the case at hand.

Common sense and the laws of thermodynamics tells us that you cannot build more houses and cars, grow more food, etc, without using more energy or increasing efficiency. Can't be done. Why is this so hard to grasp? If that was the case, then why worry about energy. Who needs it?

Boy, with all the cut an paste and quoting I may have accidently deleted it as I have edit capabilities. Didn't mean to, sorry.

MQ you're really bringing up a straw man to win an argumnet when no one is trying to argue with you! We both agree that improvements in energy efficiency are possible. We both agree that they can only get you so far. I had one small quibble with someone saying that economies can never grow without increased energy consumption and you can't take it for what it is worth, just an aside that has nothing to do with the rest of the thread. Please lets agree, that sometimes economies CAN grow TEMPORARILY without increasing energy usage (simply by increasing efficiency) but that this can not continue indefinitely and in the end energy usage must increase to grow the economy.

GDP is a measure of the value of good and services produced, not income. If there is an decrease in the need for employment due to economic decline, then you might get laid off, how could you pay your car payment then?

Then why did you ever bring it up? It seemed to be your best defense that the monetary system was compatible with a no growth world. Do others agree?

Then I couldn't pay it. However, people get laid off and fail to pay off their debts all the time, even when the economy is growing. I was using an individual as an analogy to an entire nation as an example of the ability to pay off debt without growth.

Perhaps you're right that the analogue between personal income and GDP is invalid.

I'm trying to understand why the requirement for growth is a structural part of the money system: why can't the economy just stay the same size, year after year?

So did we finally agree on my previous statement? We are allowed to correct assertions around here are we not? That is why I brought it up and then tried to immediately soften the flat contradiction by saying:
"I'm just pointing out that this statement stretches the truth."

You still haven't demonstrated any counter to the "polite fiction" argument which as I understand your thought process is where you and I disagree most violently.

shedding a tear for my Bob, Dick, the bank manager and Mary story.

Then think of what would happen if everyone couldn't pay off their debts? Look to the 1930's Depression for your answer. Life savings disappeared, homes were lost, massive unemployment. Plenty of goods and services but no one had any money.

Why must the economy grow? At the moment, to provide the goods and services and infrastucture needed to support an increase in the population and the increase in consumer demand, and service the debt through income taxes along with generate capital for investment and job creation.

Yes, I agree with you; sometimes economies CAN grow TEMPORARILY without increasing energy usage (simply by increasing efficiency) but that this can not continue indefinitely and in the end energy usage must increase to grow the economy.

As to the polite fiction...I have been thinking on this, not ignoring you. I have never read anywhere that the government never intends to pay the interest on bonds bought by the FED. And even if this was the case, I don't see how it affects debt-based money. More later. Let it ride for now, ok? I will address it.

As to your lost post, I hit the edit button instead of the quote button. Again sorry.

No worries.

Yes, but the Great Depression was a rapid economic contraction, not stagnation. What I'm asking is, all other things holding steady, must the economy grow in the long term (net growth over many years) to prevent the monetary system from collapsing?

I believe real GDP statistics account for population growth as well as inflation.

I'm hypothesizing that consumer demand could remain steady.

I'm not sure how this would work in my hypothetical "stagnation" scenario. The question I'm asking, all other things holding steady but money continuing to circulate through the economy, is there some inherent instability that causes the system to collapse? For example, would total debt just continue to increase until the interest could not be repaid?

Again, I'm not sure what would happen here. However, in the stagnation scenario, we would not need net job creation, although jobs would surely be created and destroyed.

I'll try to be concise: One of the fundamental principles of a debt-based monetary system is that the economy must constantly grow to repay capital and interest.

I sincerely apologise for the length of this post, but please bear with it if you can.

Imagine that I borrow $10k off a bank to run my business for a year. I turn that $10k into $12k. At year end I pay the bank back $10k plus another $1k because it wouldn't have loaned me money unless there was something in it for itself.

Looking at the above scenario, we find that the bank made $1k from the deal, and so did I. Great!

Now imagine you are the person who runs that bank. A bank is just a business and in order to grow your business, you need money. You can't print money so you borrow it. Being a bank, you borrow from your country's central bank, paying it back sometime later as in the previous scenario.

Now imagine MQ is running your country's central bank. MQ is in the privileged position of being able to print money which he does in order to lend it to you the ordinary bank, in order to lend it to my business, in order for me to do business so I can create jobs and wealth.

Easy!

A problem arises however when the chances of my business making money falls to below 50%. As a bank manager, you wont lend me money unless there's a better than even chance that I'll be able to pay you back. Likewise for MQ running the central bank; your bank that wants to borrow money won't be able to pay any interest because your're not able to invest in profitable businesses yourself.

In other words, the supply of money depends on having profitable businesses at the end of the line. New loans to create new jobs and wealth obviously require profitable businesses. So in a recession, central banks have to take money out of the system otherwise inflation results.

(Forgive me if I'm saying what you already understand. It's not intended to be simplistic; I just want to break this down so you can pinpoint where you disagree.)

To continue...

A recession doesn't 'break' the system; the system can cope. It's no fun, but the system keeps working. However a problem does arise when you come up against the issue of 'gearing' or 'leveraging'.

Gearing is a standard financial measure, and is inherent in the all the scenarios above; in other words, it is inherent in our current financial system.

Gearing can be illustrated by taking the example of a mortgage on a house. If a house costs $100k, and a buyer borrows $90k and puts up $10k of his money, the gearing on this investment is said to be 10 times. This is because the buyer has a $100k exposure to the house market (the value of his house), and he bought this exposure with just $10k of his own money. If the market goes up by just 5% making the house worth $105k, he could sell making a $5k profit ie.a 50% return on his $10k investment. Likewise if the market falls by just 5%, he will make a 50% loss. If the market falls by 10%, he will loose 100% of his investment.

Gearing is the reason that the system can cope with recession, but only up to a point. If the recession lasts for so long that it wipes out the gearing of the system as a whole, the system itself 'breaks'.

Pretty sure you're off there. It would really make it hard to compare GDPs between countries if that was the case, and would make GDP per person kind of redundant.




This comes down to where MQ and I differ. I don't see any inherent instability in the monetary system he (I believe) does. For what it's worth I do think I've got the majority of the FOMC on my side.

I also believe I have history on my side since the fractional reserve system of banking is a very old system indeed. It is even older than the concept of growth.

Yet, you have failed to explain how this monetary system will deal with the lack of economic growth due to resource depletion. Print money, you say? Money supply in excess of demand sounds like hyperinflation of the currency to me. The majority of those FOMC members are flat-earth economists, expect. As to history on your side, when was the last time fractional reserve banking dealt with peak-oil? Oil is rather unique in the big scheme of things, don't you think? This is not peakwhaleoil.com at the moment, nor anything else from the past. This is a one time milestone in the history of the earth that will never be repeated.

The principle of our present money system is: money is provided to the people as an interest bearing debt, monetized by the bank, based on future production. The money to pay interest is never created. That forces the people to always be trying to capture some part of the other fellow's loan to survive and gain financially. When we successfully pay off a loan, the debt is transferred to someone else in the economy. The debt must constantly grow as the interest compounds. As we labor hard to try and pay the debt, the growing money shortage results in a growing loss of buying power causing an ever rising cost-of-living.

These principles create a nation of debtors who must work harder, faster and smarter while going deeper and deeper into debt as a whole. This ever increasing debt causes, higher taxes, higher prices, constant loss of buying power, creates diminished unit-volume demand which results in lay offs, down-sizing and mergers while increasing tax pressures on the remaining employed for social programs which simply shuffles money. It does not create the additional money needed to fill the shortage caused by the compounding debt. Gee whiz, even without resource depletion, this money system is ready for the dumpster.

Real-time reality is on my side. An enormous debt and asset bubbles...all borrowed at interest from, not somewhere, but from mostly China, Japan, and Taiwan.