Is a debt-based monetary system compatible with oil depletion?
Yes
15%
[ 38 ]
No
84%
[ 202 ]
Total Votes : 240
Author
Message
spot5050 Heavy Crude
Joined: Dec 07, 2004 Posts: 482 Location: Cheshire, England
Posted: Thu Dec 30, 2004 4:43 pm Post subject:
MQ wrote:
How can a monetary system based upon infinite growth in a finite world function when the ever increasing required energy for new growth declines, fails to meet demand, and no viable replacement is found?
Obviously it can't.
What are you hoping to discuss here MQ? Do you want to test the assumptions in the question? Or maybe try to imagine how a post-peak system would operate? Or how the transition will come about?
Does anyone have a link to a study of a previous (debt-based) economy where the underlying resource(s) declined?.. something like Liamj's whale-oil link but looking at a whole economy, not just a product.
monte, thanks for saving us all so much typing by responding forcefully and eloquently to the people who have no clue what they're talking about. I am always excited to see a new post with your name on it.
on topic: your question is rhetorical, as has been pointed out by others. If there were an answer we wouldn't be worried about peak oil, and none of the resource wars that have punctuated human history would ever have occured. It seems like a waste of time to keep trying to get people to answer that question when the only ones who are silly enough to try are the ones who have no grasp of the way things work. I suspect you are bored or trying to prove a point...
What are you hoping to discuss here MQ? Do you want to test the assumptions in the question? Or maybe try to imagine how a post-peak system would operate? Or how the transition will come about?
Well, I had thought it was obvious. There are a lot of people who feel that the laws of supply and demand will solve all of our problems, we need not worry. How can it be done with a monetary system that requires growth when that growth can't be had? Sure, it leads to a recession, then a depression. How can one grow out of a depression when the energy required for the growth is in permanent decline, and the demand is ever increasing due to population growth? So, I'm looking for someone to explain their logic and confidence that it can be done. So far, I have gone wanting.
And lastly, if I am right, it can't be done...then what could we do to correct the situation? Or more realistically, what can we do to prepare for the consequences? Maybe I think too much! _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Joined: May 22, 2004 Posts: 1424 Location: Ottawa, Ontario
Posted: Thu Dec 30, 2004 6:13 pm Post subject:
Post Script, You might argue in my Bob, Dick, the Bank Manager and Mary story I cheated by requiring a borrowing surcharge at the start of the loan instead of an interest chanrge at the end of the loan. But I didn't really, the Bob, Dick, the Bank Manager and Mary world is at steady state. Just redefine the bank surcharge at the start of the month as the interest charge on the loan from the previous month and you still have a steady state system, it is just harder to explain where the bank got the first twenty dollars to pay for the first month's worth of services.
According to IAEA.org, Sweden's GDP growth from 1980 to 2001 was 2.7%. while total energy use rose at .36% (mainly due to their aggressive conservation and efficiency programs during those years and making do with less) primary electricity use rose at 1.9% just like I said. There are no free lunches out there. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Yes, they do, at interest from the government. Then the central banks utilize fractional reserves to lend the money into circulation.
The government spends it into existence. The government takes the money it receives from selling the bond and buys goods and services, pays salaries etc.
The only question mark is where did Dick get the 20 dollars from in the beginning? Well if we renamed Dick the "Federal Government" it would be pretty simple to guess where the first 20 dollars came from (Those central bank printing presses) There ya go. No problem about interest in this case cause it was all paid up front as the borrowing surcharge. The world is at steady state and no money needs to be added to take care of the interest.
Yes, the government spends the bond sales revenue into existence, but they have borrowed the money at interest to do so by selling a bond with a specified interest return. No money gets into circulation without debt interest accompanying it. That is why it is called a debt-based monetary system. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
I think the monetary system is compatible with peakoil.
We always had a fiat currency, even the gold standard is a fiat currency, since the value of gold is determined by us. We say that a house is worth $400.000 dollar and a roasted chicken $2. A house is thus worth 200.000 roasted chickens. A house and a roasted chicken is an asset.
The value of a currency is thus determined by the number of assets and how important we perceive those assets to be. Both the number of assets as our perception are subject to change.
Perhaps we will have less houses and less roasted chickens in the future. That means that the same amount of money covers less assets. Thus the price of the roasted chicken and the house will rise.
Perhaps our valuation will also change. Maybe in the future a roasted chicken will be more important to us in comparison to a house. Then the price of a roasted chicken will increase in comparison to a house.
In that sense our monetary system is capable of coping with peakoil. PO will decrease the number of assets and will shift our priorities. After the peak we will find it harder to create new assets, moreover, we will find it harder to maintain the assets that we have. We will also see a shift in priorities. Probably we will find a suburban condo somewhat less important than our daily food. Therefore the housing prices will go down and food prices will go up.
Although this can have very negative effects for the individual, these are perfectly normal adjustments of the monetary system. Without intervention the system would level out. But herein lies the danger. Our monetary leaders don't like these movements and history shows that they usually react in the most stupid way possible. They start printing money.
The still don't get the message, that when you create money without creating assets, you devalue the currency. This can escalate in a situation where you need a wheelbarrow full of money to do groceries. At that point the currency has lost it's usefulness.
So I think our monetary system is perfectly compatible with peakoil. It's our financial leaders which are not.
I have attempted to explaim why your idea that it requires growth to maintain the monetary system is not correct. For what other reason do you think it will suddenly stop working when the current temporary fossil fuel impelled growth has stopped?
And you have failed miserably. All the printing presses in the world will not grow an economy without the requisite energy required to meet the demand necessary for growth. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Today, when money is created, it is created in the form of credit for the banks, and is issued in the form of debit to whoever takes the loan, private citizen or government. Of course the debt must be repaid, the money is considered to be "the bank's money", and of course for that reason we must pay interest. I call that debit money and I have already pointed out that this debit money is the cause of much — if not all — of our economic suffering.
Credit money, on the other hand, does not have these drawbacks. The money should be issued and be given — yes, given not as a loan, but as a rightful share in the development of the economy, to each and every citizen. When money gets created, it was not the banks that worked for it, but the people, and so quite rightfully, the people should become the owners of the money once it is issued.
Joined: May 22, 2004 Posts: 1424 Location: Ottawa, Ontario
Posted: Thu Dec 30, 2004 6:44 pm Post subject:
Quote:
According to IAEA.org, Sweden's GDP growth from 1980 to 2001 was 2.7%. while total energy use rose at .36% (mainly due to their aggressive conservation and efficiency programs during those years and making do with less) primary electricity use rose at 1.9% just like I said. There are no free lunches out there.
You must mean iea.org? Link? We're not in disagreement here, I was just pointing out that you can do alot with increasing efficiency. The 0.36% Would be wiped out if you chose a different starting or ending date. But even so your data means that over those 21 years the real GDP of Sweden increased by 75% while their energy use increased by less than 8%.
So I think our monetary system is perfectly compatible with peakoil. It's our financial leaders which are not.
You never addressed the question:
1.How can a monetary system based upon infinite growth in a finite world function when the ever increasing required energy for new growth declines, fails to meet demand, and no viable replacement is found?
How? Be specific. Explain the process. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Joined: Dec 07, 2004 Posts: 482 Location: Cheshire, England
Posted: Thu Dec 30, 2004 6:55 pm Post subject:
MQ wrote:
There are a lot of people who feel that the laws of supply and demand will solve all of our problems
Not me! To me the scary aspect of PO are the implications for the world's financial systems because from what I understand, they seem to assume and be based on growth; they are designed around growth. As a concept that shouldn't be too difficult for anyone to grasp because those systems evolved during a period of many decades of growth. Those systems are simply a product of their environment.
MQ wrote:
How can one grow out of a depression when the energy required for the growth is in permanent decline...? So, I'm looking for someone to explain their logic and confidence that it can be done.
Sorry, can't help you there!
One more quote...
MQ wrote:
Lastly, if I am right, it can't be done...then what could we do to correct the situation? Or more realistically, what can we do to prepare for the consequences?
Do you mean on a personal level or are you talking about society? I know that I will not be able to influence society so I'm getting selfish and just looking after me and the people around me that I care about.
According to IAEA.org, Sweden's GDP growth from 1980 to 2001 was 2.7%. while total energy use rose at .36% (mainly due to their aggressive conservation and efficiency programs during those years and making do with less) primary electricity use rose at 1.9% just like I said. There are no free lunches out there.
You must mean iea.org? Link? We're not in disagreement here, I was just pointing out that you can do alot with increasing efficiency. The 0.36% Would be wiped out if you chose a different starting or ending date. But even so your data means that over those 21 years the real GDP of Sweden increased by 75% while their energy use increased by less than 8%.
No, you said it was not true that you couldn't have GDP growth wihout an increase in energy use. You were making your case that more energy consumption isn't required for economic growth to support your case for why our monetary system is compatible with peak oil. I pointed out your fallacy. Don't try and backpedal. Increased efficiency only goes so far. What do you do then for an energy source to grow GDP and keep the money flowing if your energy source is in terminal decline? That is the dilemma. That's what this thread is all about. No one has even provided an inkling of a proposal so far. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Joined: May 22, 2004 Posts: 1424 Location: Ottawa, Ontario
Posted: Thu Dec 30, 2004 7:01 pm Post subject:
MQ wrote:
Yes, the government spends the bond sales revenue into existence, but they have borrowed the money at interest to do so by selling a bond with a specified interest return. No money gets into circulation without debt interest accompanying it. That is why it is called a debt-based monetary system.
You seem to be stuck on this polite fiction of the central bank (The Fed to you Yanks) holding federal government debt. The central bank can and does continuously increase its holding of federal debt to pay the interest on the debt it already holds. It also says that it makes a profit from this debt and uses it to fund its own activities and (at least in Canada not sure about the US) gives a dividend back to the federal government from the profits it makes on holding federal debt. In the end it really doesn't matter, they could just give the money to the federal government in brown paper bags but they do it this way to keep the accountants happy.
Quote:
And you have failed miserably. All the printing presses in the world will not grow an economy without the requisite energy required to meet the demand necessary for growth.
I wasn't talking about growing an economy I was talking about the monetary system. That was the subject of this thread.
Quote:
1.How can a monetary system based upon infinite growth in a finite world function when the ever increasing required energy for new growth declines, fails to meet demand, and no viable replacement is found?
I think several of the posters here, myself included, have a problem with the assumption that the monetary system requires growth.
Lastly, if I am right, it can't be done...then what could we do to correct the situation? Or more realistically, what can we do to prepare for the consequences?
Do you mean on a personal level or are you talking about society? I know that I will not be able to influence society so I'm getting selfish and just looking after me and the people around me that I care about.
Yes, on a personal level. I am under no illusions that we can change the current system. It's why I wrote this or any thread I write: I wish to help others understand the dilemma before us. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
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