It is not that complicated... Please follow along.
In a debt-based economy there must always be more money owed than is in circulation, otherwise there would be no money.
No. Even if you count government debt at the central bank as real debt (in reality its not), you have as much money as debt in circulation.
Since this is true the only way to keep it going is to continually accelerate the rate of growth of the economy...
Even accepting the previous as true (its not), I dont see how "the only way to keep this going is to continually accelerate the rate of growth of the economy"... I dont really understand what this sentence mean.
Because that is how all Ponzi schemes perpetuate. Once the rate of injection into this type of economy slows down it can quickly collapse. This injection comes in the form of actual physical resources that have to be extracted.
I dont understand what you are saying. Injecting physical resources?!?
It requires energy to extract these resources. The problem is, that over time, as you extract the resources that are easiest first, it costs more and more in terms of energy to extract those resources. You reach a point of diminishing returns. At some point, the rate at which you inject new value into the economy is slower than is required to keep a debt-based economy running.
No. The reason why the inflationary cycle becomes unsustainable is because the distortion in the capital structure create inefficiencies and malinvestment. As the system becomes less and less efficient at the end the system collapses.
Interest rates get lower and lower (diminishing returns), and it eventually stops working.
Interest rates go down as a way to keep the malinvestments that the inflationary cycle created going (that obviously produces diminishing returns). It has nothing to do with diminishing returns from resources or technologic advances. There were economists some decades ago trying to relate business cycles with technology changes but it was a complete failure, basically because they are not really related.
In order to keep the engine running (so to speak) Keynesians rely upon the 'business cycle'... Which is to say, periodically pulling away from the brink of unsustainability, that is until there is eventually a brink you can not pull away from. This also acts as a means to make massive transfers of wealth from those that have access to few financial markets to those few that have access to all financial markets.
Yes, this is absolutely true. Although I am not sure if keynesians in general know what they are doing or are just completely clueless and the whole thing just blows up because its not sustainable. Maybe some at the top know, there really is no way to tell.
"discoordination in the economy and stops growth" is just another way to say 'not sustainable'.
I think we kind of agree but the problem is how you use the word "growth".
I never mentioned GDP. GDP is expressed in units of the currency for the economy in question, and as such is not really an objective measure. IMO it wold be best to represent such growth in terms of total resources consumed versus total resources produced... But economists generally refuse to track metrics that tell the truth.
From how you are using the word growth it really seems you mean GDP. How do you define growth?
It would be interesting to have statistics in terms of real resources and not money. But it is impossible or extremely difficult; its not that someone is trying to avoid that type of analysis. How do you clasify objects?. Imagine only the computer industry. How many types of computer do you report? If you aggregate too much you are loosing valuable information, if you dont the data becomes unmanageable. That is why the price system works. The problem is that the price system is so completely distorted by the monetary manipulations of the governments that it just becomes too dificult to know what changes come from supply and demand of the goods and what part comes from monetary manipulation. It is a big issue.
Part of the reason that the German economy is still strong is that Angela Merkel clamped down on foolish derivatives trading which would have resulted in higher inflation. It will not continue to be strong unless it de-couples itself to some extent from the EU economy.
While I agree that in some way it would be good for Germany to decouple from the euro (it has the problem that it loses a big market that controls), the other part is just not true. The Germany economy has always been strong, way before the derivatives growth. Since Weimar and the National Socialists, the germans have always had a strong currency policy that has allowed them to build industry.
The reason why a strong and stable currency helps to build industry is simple. Inflationary monetary systems distort the natural interest rates and produce a series of malinvestments. While the manipulation goes on this investments appear profitable (this is the bubble), but then they come crashing down and they reveal as malinvestment and waste. Now this is a lost opportunity and wasted resources, that could have been dedicated to built a sustainable industry. In the short run inflationary countries can give the appareance of growth, because of all the econimic activity of the bubble, but in the medium and long run its ruinous.
I would point out that the currency that Germany is using now is the Euro...
Yes, that is the 'Capital' in 'Capitalism'.
Capital is defined as the goods that help create other goods. For example, a shovel is a capital good. It helps you produce other stuff. Its not the stuff you want to consume. This definition is the traditional definition. Even Karl Marx uses this definition.
But in the financial circles because they only see money, capital has started refering to money, and this has moved onto some economists. But the definition of capital is stuff that helps you produce other stuff. Money, except in the financial world, is not strictly capital.
And yes, when governments start messing and centrally planning the currencies bad things happen.
Can you explain to me how the Bitcoin algorithm is not 'central planning'?
I dont really see the connection. Central planning means organizing the production of a society. How is the Bitcoin algorithm central planning?
Again, GDP = fictitious metric.
Its not really ficticious, it measures economic activity, but it can be distorted if the price system is distorted.
But I really think you are using the word growth as increase in the GDP. I would like to know your exact definition of growth.