It is a fact that the relationship you describe is an inevitable consequence of double entry bookkeeping, a medieval (how pertinent!) invention for keeping track of assets and cash flow. What is not a fact is that money must be issued as debt along double entry bookkeeping lines. That is merely a convention, a convention, furthermore, which addicts us systemically to perpetual linear growth. That this system is unsustainable is clear to a child.
Here’s a passage from economics Professor Franz Hoermann (from “Das Ende des Geldes”):
“When this secret knowledge—that accountancy is not an empirical science but a medieval art form similar to the above mentioned theological debate about angels—becomes broadly known, then the interrelationships of the financial world and the wider economy will be clear to population and politician alike. Obviously theological discussion is important and necessary, and we have no intention here of devaluing it. But its methodology is simply not suited to running an economy, since its claims and counterclaims are always vague and therefore manipulatable. Small groups of insiders can twist the interpretation of the various meanings to their own unfair advantage as they please.
We fear that genuine, foundational reforms, precisely for this reason, have remained underground and fringe all this time. This core reason, the unscientific nature, and high susceptibility to manipulation, of bookkeeping and accountancy, leads like an arrow directly to political lobbying, which is nothing more than targeted manipulation of commercial and other law in the interest of minority social groups. The damaging belief in bookkeeping and accountancy will be with us for as long students in schools and colleges are taught by rote the rules of accounting processes and legal texts. Learning by rote is of course not learning in an academic sense, in the sense of mentally free education. It is far more a mental manipulation tool of a narrow minded religion, repressing its flock for centuries. Those who are trained by rote learning have no way of recognizing the deeper context of the subject at hand. A deep belief is burned into them, without their active awareness and often against their wills. This process is called brain washing by psychology.” [My translation.]
Hoermann, who is both economist and accountant, calls economics propaganda, as does Professor of Philosophy John McMurtry. Chilean economist Manfred Max-Neef points out that economics sees nature as a subsystem of the economy, an obviously absurd inversion of the truth. This sham discipline is not only unscientific, it is rotten to its core. A little tidbit from Keen’s “Debunking Economics”:
“Economic theory argues that productivity falls as output rises, so that higher levels of output result in higher prices. The ‘supply curve’ therefore slopes upwards: a higher price has to be offered to entice firms to produce a higher output.
Though this sounds intuitively plausible, when this theory was put to those who do know how factories are designed and managed, they rejected it as “the product of the itching imaginations of uninformed and inexperienced arm-chair theorizers” (Lee 1998, citing Tucker).”
Hoermann describes the “Law of Supply and Demand” as a fairy tale. I am not aware of a single component of economic theory that holds up to scrutiny. Why treat it with anything other than contempt?
If only it were linear!
Creating money as debt at interest commits us to exponential growth. Malthus, one of the first economists, clearly saw the contradiction between exponential growth and finite resources. The only way around this has been finding cheaper more abundant substitute resources (in the last round, fossil fuels) when the previous ones run low.
May 31, 2011 at 9:15 am
Very true, but I meant linear in the sense of “no recycling protocols or procedures, the implicit assumption of infinite resources, and no concern about the nature of waste.” And yes, yes, yes! usury foists on us a systemic addiction to exponential growth. A point most people simply don’t want to address. It may be the death of us. The denial is profoundly stubborn.
May 31, 2011 at 4:40 pm
There used to be a field called ‘political economy’.
In the 20th century, as social and political life became more complex, the field split into two strands: political ‘science’ and economics (just as physics separated more and more from chemistry as the amount of information within each field became more complex).
All the status was in the ‘sciences’.
But some things are SOCIAL sciences, and in those fields, it’s much harder to do the kind of hypotheses backed up by experimental design and testing that is normally done in chem and biology.
By adopting claims to ‘science’, both political studies and also economic studies sought to wrap themselves in a sort of Intellectual Invincibility that neither field merited.
Because neither economics or politics are ‘hard’ sciences, they are particularly vulnerable to the seductions of ideology — in the absence of genuine, verifiable testable methods, they easily fall prey to whoever funds tenured positions, whoever is appointed to journal editorships, etc, etc.
Biology and chem are not subject to the predation of ideology in the same way that the social sciences (political studies, economics) are so easily bent to the needs and requirements of existing power structures.
Tuesday, May 31, 2011
To this post on Naked Capitalism:
Posted by escapefromwisconsin at 6:47 PM