Banking not part of the solution as our debt legacies are exposed

The ECB has dropped its interest rate to 0.05%. What we are witnessing is the death throes of banking as we know it.

Every single predictor of future GDP growth since 2007 has been wildly inaccurate. Time and time again, we are told our economy and those in Europe will grow by 2% or some other figure. Invariably every time the results show an annual rate of at best 0.5% per annum.

Modern banking works on issuing credit into society as debt.

When you issue credit as debt and charge interest on it, society has to be able to source the interest or else nobody can pay it. Banks do not create it so people need to obtain it from existing money in circulation.

If the population never expanded, the banking system would crash very quickly when interest could not be found.

The saviour for banking has been population growth, ie younger people releasing more new credit as debt. It is what has kept the whole dysfunctional edifice afloat for centuries.

The worldwide population was 1.75bn in 1900.

In 2010 it was almost 7bn. That was a quadrupling in headcount.

Over that approximate century GDP rose by an average of roughly 3% per annum across the world. In 2100 the population will only be 10bn. That is eight times less growth in population for this century. That is eight times fewer people accessing credit as debt, or taking on ‘loans’. What does this mean for GDP?

It means the GDP rise will be roughly 0.4% per annum across the world from now on. But the existing interest drains already exceed this growth figure.

Therefore mathematically our current monetary system is in a death spiral. No amount of tinkering or rate reductions can fix it.

The cumulative effect of at least 100 years of interest being levied —without being created — has done the fatal damage.

At the moment it seems there is a clamouring for people to outdo each other with ‘Comical Ali’-type press releases about economic resurgence and property bubbles.

When a sober view is taken on money, money creation and ‘debt’ legacies this propaganda is cruelly exposed.

We need a new and fully transparent way of issuing credit in the future.

Banking, as we know it, is not part of that solution.

Barry Fitzgerald

Lissarda

Co Cork