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The money supply and degrowth: challenges and possible solutions

It is now widely acknowledged that the vast majority of money that exists in the economy at present has been created by commercial, for-profit banks on the basis of debt.

One might wonder, is this type of money compatible with degrowth?

While some economic modelling suggests that it could be, empirical evidence indicates, to the contrary, that relying on debt creation as the basis of the money supply is very unwise in an economy that is not expanding.

This is because, if money is primarily debt-based, its continued existence and ability to circulate in the economy will always require a certain level of credit demand - and as one empirical study put it, ‘‘…economies with stagnant real economy growth are likely to see continued depressed credit demand.’’

Money is not solely a mathematical construct; indeed, it is first and foremost a cultural phenomenon, whose existence is based on peoples' ideas about how the future will be. And although the process of money creation may appear to be rather abstract, changes in the creation and circulation of money in the economy have very strong real-world implications for everyone.

So how can we guarantee a money supply that remains reliable - and that, vitally, also helps to deliver social needs in an equitable way - in a shrinking economy? This presentation and discussion will draw on examples of different money systems from the past and present in order to suggest some ways forward.

Info

Day: 2023-08-30
Start time: 16:30
Duration: 00:30
Room: ZV-8-5
Type: Non-academic Session
Theme: Alternative economies

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