Trying to Stay Centered in a Complicated World
Recently, I accidentally stumbled across my Easter post from last year.
Actually you are underestimating how fast lending creates money because banks are allowed to lend more money than they have which itself creates money. Say I have assets of $10 million. When a bank lends money it just writes a check, it doesn't actually hand out cash. So if they make $50 million in loans based on their $10 in assets they have just added $40 million to the economy. Isn't there risk, you may well be thinking, in making $50 million in loans when you've actually got only $10 million on hand? What if those people don't make their loan payments on time? Won't that bust the bank? Yes, it would but banks take on the risk because the Fed provides various levels of insurance to lenders to encourage them to make the loans. As for the specific questions...Is growth necessary for a healthy economy? Theoretically no. But people like growth because it is good considered in itself. Every technological innovation in principal grows the economy. To be able to make more pins with the same amount of labor means that our economy has thus grown and we either just have more pins or some of the people making pins can make something else we would like to have. Growth means that collectively we have more stuff we want. (Of course if we have distribution problems, that is, if only the rich are getting richer then we are not really better off, only the rich are.)2. No, the reason is not just to support population growth. But supporting more people at even the same average we have now does require at least that much growth. 3. No, ecological sustainability does not ultimately demand a steady-state economy. This isn't a matter of pace at all. It is a matter of using technologies that place do not stress the environment. Suppose I invented a solar power collector which produced no pollution (I'm thinking something like solar collectors in space.) We could then grow the economy just as fast as we could build these collectors and put zero additional strain on the environment.