Straitjacket economy

This is a followup on my blog entry Straitjacket of consuming. 

I have started to think that we (Northern Atlantic economies) indeed might have allowed ourself to be subject to a grande economic system, which can function only by perpetually expanding credit. And to do that, people have to bury themselves more and more in work, government spending has to grow, and companies have to create products and services for which there are less and less any fundamental need. Because we cannot create real wealth fast enough, and because our economic system will create great pain if we fail at doing this, we are forced to create asset growth artificially. We have to create air. Increasing stock market speculation and derivatives are a symptom of this disease.

When the housing assets started to lose value in 2006, the economy could have survived the hit if people had bigger savings rate, and companies would have had more financial cushion at their disposal. The economic downturn is so much worse, because everyone has so little slack. If there is even a minor disruption, the shit hits the fan big time.

So what is the reason for the underlying reason that creates credit expansion? Credit comes from banks. Banks create money in the form of credit. When someone opens a new bank account and makes a deposit, that money is loaned out many times it's size. Banks create money out of money. They don't have to create any real value, like produce or manufacture something, they can just make up the money. Banks get money as loans from central banks. Where do central banks get their money? They create it out of thin air and loan it to banks and governments with interest. Now is it then so hard to understand why the money supply is growing so much faster than everything the whole world produces? Is it really hard to understand why money loses so much value? Why we work so much? Why both men and women have to work in order to provide food to the table? Why we have had so many economic crisis in the last 100 years?

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford