The Economy – please help me understand what I am missing

Back when I knew nothing about economics, I used to hear news that "the economy isn't growing" and thought "so what?" I expected that once everything was going fine, things could stay the same and that would be ok.

But it isn't. When the economic growth slows down, or if it comes to a halt and the amount of business being done is the same tomorrow as it was today, intuition would tell you this shouldn't be a problem, but if you study the mathematics of the situation, it is.

I'll explain...

Since all of our money comes into existence as debt (most of you already know this) and since all that debt is tied to compound interest (which is an exponential function - it continually grows and does so faster and faster as time goes by) - then the economy must grow with it in order to be able to pay back that interest. The burden gets larger over time, and it does so at a faster rate. This is why the economy must be constantly growing, because if it isn't... then the banks aren't getting paid back their interest. And if the banks ain't happy... ain't nobody happy.

The effect reverberates throughout the real economy. Even though banking and finance deal in illusions, the lies they perpetuate are tied to the working man on the farm or in the factory, or wherever. In the end, all the money that we deal with has a "monkey on it's back" which gets larger and heavier, and unless the economy is growing faster than the monkey is growing, that monkey is going to crush the economy.

"Compound interest is the invention of Satan." - Thomas Edison

reply to post by tk1967

Bernanke can't afford to get realistic with those who can't handle the truth. There is a lot of speculative activity going on based on economic prognosis, and the investors get always deeply defensive upon hearing not so rosy estimates, and they react with more pessimism than the circumstances call for. It's been always that way in many aspects of human activities. Just hit the refresh history button and check out the words spoken just before the Final Flush.