Wednesday, October 1, 2008
The Growth Misconception: ‘Money based on interest can grow forever.’
Money is one of our most ingenious inventions. It helps the exchange of goods and services and overcomes the limitations of barter, thereby creating the possibility of specialisation, which is the basis of civilisation. However, throughout most of history, the circulation of money has been based on the payment of interest. Interest leads to compound interest. Compound interest leads to exponential growth. And exponential growth in turn is unsustainable. Therefore, in order to understand how our monetary system works as an ‘invisible wrecking machine’, we must first understand four basic misconceptions about money which almost everybody holds.