We have a money problem, or rather a predicament, and most people are neither aware of that fact nor properly appreciate the profound damage that results when a society’s money system breaks down.
Our system of money was put in place at a time when the world must have seemed so vast as to be indistinguishable from being infinite. One could operate as if there were no limits back in 1913 because the system boundaries were so far away that they could be safely ignored.
Back then whole parts of the world hadn’t been accurately mapped, nobody knew about nuclear energy because it hadn’t been harnessed, and virgin forests and other resources had yet to be tapped.
So, it probably didn’t alarm anyone that a debt-based money had been selected, although in retrospect I’d be surprised if there weren’t a few renegades who immediately spotted the main flaw of any debt-based money system which is this: They are based on the mathematical impossibility of requiring perpetual exponential expansion.
For the first 60 years, this bug in the system (or was it a feature?) lay dormant and didn’t cause much trouble because it was anchored by gold. Every time the necessity of expanding further outpaced the amount of gold the system would self-correct. Painfully, but these were mini brush fires and not disastrous crown fires that could burn everything to the ground.
Eventually, this limiting nature of gold became too much of a political nuisance which led to Nixon abandoning the golden tether on August 15th, 1971.
Without that golden anchor, the financial system was free to create money and debt (as those are two sides of the same coin in a debt-based fiat money system) without any restraint. Which it did.
Let’s start at the very top and work our way down. Debt in the US has been expanding exponentially.
Here’s a chart of US debt growth between 1971 and 2009, when the Great Financial Crisis, or GFC, kicked off.
The solid blue line is Total Credit Market Debt in the US, with the data coming from the US Federal Reserve. The light dotted line is an exponential curve it. It fits so well, that its “R-squared” is a whopping 0.99, as noted in purple.