Money is a tool of government and the basis of a financial industry that has grown out of banking. Governments issue money in receipt for goods and services and it is accepted because it can be exchanged by recipients for things that they want. Banks learnt to use the currency created by governments to provide the basis for credit. This system can offer all users both a medium of exchange and store of value that is relatively stable and can lead economic activity, which is how we describe the physical process of energy conversion to give us sustenance, comfort and to realise our imagination. However, for the system to be sustainable money and credit has to be recycled by governments reclaiming money through taxation or borrowing and banks charging interest on credit and requiring capital repayments. If either the supply of money or credit increases or reduces dramatically without relation to economic activity, the system comes under strain, as has happened in recent years.
Conventional wisdom states that economic growth is the best solution to correct monetary problems. Unfortunately for our generation because human population has expanded rapidly (from one to seven billion in approximately one century) the sum of our energy conversion has put pressure on global resources, which means that we need to reduce our current economic activity if we are to prevent further damage. Therefore, we need a change of values away from acquiring ever more energy consuming ‘stuff’, which measuring growth by money encourages.
If the prevailing belief is that humanity is made up of irreconcilable competing groups then humanity is probably doomed to economic degradation followed by mass starvation. Fortunately, the underlying truths are: that people are one just part of a greater whole from which we can never be separated; the energy that sustains everything can never be destroyed or created; it changes its form through us but also, and significantly, through processes we do not control. Thus there is always the potential for sustainability but it does require us to adjust our systems (including the financial one) to fit physical reality.
Paul Newman