Questions Answered, cont.


A "mature" Price System eventually arrives at the crisis of too much Debt, unsustainable debt. It has happened many times before to many nations. It is happening to us now.


Extraordinary measures are invoked to sustain a failing system. They are measures intended to maintain the status quo, to ensure social stability, to protect the interests of "majority debt holders" - that is, the rich.

The most extreme measure is resort to war, as in the case with Germany and other nations. It provides for physical growth, however wasteful. It is not a likely measure in America. Other means are at hand.

Expansion of foreign trade is a temporary, but useful measure. Initially it gives an outlet for the investment of excess funds. It may result in a sort of "Tiffany" period of culture, during which the return trade features elaborate handwork products, as in Victorian England, to go along with "Upstairs Downstairs" maids and other domestic support of the affluent segment of society.

The most common measure is Inflation. Printing press money is distributed by the government to keep the wheels turning and the economy functioning. In most countries of limited productive capacity, this simply raises prices. Ever increasing amounts of unbacked currency eventually cause catastrophic inflation and ensuing collapse of the economy. Then a new currency is substituted for the old, and the process begins again.

In America the physical capacity to increase production has permitted modest inflation of around 2% without causing social disruption. Coupled with generous allowances for write-off of the bad debts of bankruptcies, and other measures to sustain the profitability of the banking system, this measure has worked well so far.

The debt crisis of the late 1920's developed into the deflation of the 1930's, during which the value of money was maintained, tied to the gold standard, and all other values declined. With the business scene stagnant or failing, governments became the prime borrowers and maintained the economy with "pump priming". But it took WWII to revive economies substantially.

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