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25 February 2009

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Robert Grumbine

I don't have any answers, but can point you to another blog where the author considers "Should we measure economic success by a continual increase in consumer demand? And if we don't, what replaces it? How do companies set profit targets that aren't based on continual expansion?" all to be important questions. Well, on the last, I don't think he's really thought about it but if you brought it to his attention, he may well see its import. -- http://initforthegold.blogspot.com/

One component of the situation is that banks lend at a percent interest. If a company borrows a million at 5% interest, they have to grow enough to pay back an additional 50,000. If they borrow a billion, they have to pay back an additional 50 million. This is the heart of an exponential process. Exponential processes _cannot_ be extended indefinitely. Irrespective of honesty of the players, or good intentions, etc., anything that is growing exponentially and is reality based will always run in to some limit.

Banning the charging of interest would avoid the exponential problem, but would create a batch of others. Medieval Europe was able to experience the Rennaissance in part because it finally decided, contrary to Augustine, that it was ok for Christians to make loans at interest. (Conversely, it was because of that practice by Christians that Jews were the money lenders. Given the recurring mass murders of Jews, they couldn't become wealthy enough to fuel the Rennaissance.) Then again, maybe US economy is now sufficiently different from what has prevailed the previous 2000+ years that extremely different lending practices than are current would at last be usable.

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