posted on May, 22 2012 @ 02:08 PM
It's usually best to start at the beginning. Some mistakenly think that interest rates are the sole cause of growth requirements. Consider for a
moment that they don't exist.
You create 10 units of currency, by 'borrowing' them from an institution that creates them. You have to pay back the 10 units. You now pay for
something you need. Another party now has, say 11 units. You have nine. The other guy also borrowed 10 units. He can settle his 10 unit debt and
still has 1 unit to spend. If he spends it with you, you can settle your remaining 1 unit of debt. But now there are no units left. A third party
must exist, who also borrows money. Then a fourth, a fifth etc. Each person must somehow convince another to part with their money. To avoid the
zero-sum, in which all debt is settled and no money remains, requires that new parties to the system continually emerge. Or, growth, as we call it.
The stable ecosystems you used as an example are situations where two rates of change happen to be equal. The rate of birth, and death. If
populations grow, the money supply must grow with it, interest rates or not. Of course, having money in circulation, physical or digital is, in
itself, the basis of some people's business model.