alt Hacker NewsYou have two underlying factors which make everything else downstream moot. Fractional reserve lending and plastic imports. FRL means a bank is depositing $5 and lending $50 then charging you interest for the $45 they never had in the first place. Now you must extract that interest from someone else, who likely finances the missing amount and compounds the problem. So that’s how we stay ‘afloat’ if you can call it that despite the problem of #2. #2. Plastic is made from oil. Whereas anyone would exchange labor for energy, energy prices money. It’s the civilizational bottleneck. It would be cheaper to empty fort knox into Boston Harbor than accept another ship of disposable plastic goods that we send to a landfill. It’s effectively taking a big wad of US wealth every day and lighting it on fire, then using the nonsense FRL to make up the difference.
Given all that, whatever labor or wage trick you do is rearranging the deck chairs on the Titanic. I know how to remediate the plastic issue, which is an engineering question. Until that’s addressed the union sq debt clock is counting the cargo ships docking to feed our money/energy/oil->landfill pipeline.
Money supply management is important for price stability. There's no debt problem in fractional reserve banking. (Exactly because debt is slowly inflated away while real assets keep their value [as their nominal value increases].)
There's a tremendous amount of economic growth. And as long as there are places where we can put in some better technology, a more efficient process or organization, then growth will continue, and the money supply will have to grow, and it's currently done via bank-issued money, because it provides some risk management. (Which is the most important factor of money creation. This is why finance and insurance developed intertwined.)
Energy is one bottleneck, sure, but there's no serious slowdown of growth of electricity generation capacity for example. And GDP growth is decoupling from carbon intensity. (As it should as we started to invest a lot of our economic surplus to do so.)
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The important thing to remember is that there's a balance between how much money is needed now and how much is issued to be paid back later, and obviously if the growth would be almost zero the interest rate would be almost zero too.
If growth slows down (the fiscal multiplier goes down, there are no more public things to do, no more houses to insulate to get a smaller HVAC bill, no unemployed person to teach skills who would then work) then need for money also goes down, as no one will offer to pay it back with interest, so interest rate will go down, so whatever amount of money we have (as debt) we can keep rolling it over.
And of course the central bank can always exchange debt money to non-debt money. (And every time it wants to increase the interest rate it used to do something similar, it sold assets [US Treasury bonds] which removed debt money from the system. And back in the 90s there was talk about how the US central bank will adapt if the US government starts to run surpluses permanently.)