Each rentier skimming from this chain drains off another fraction of the debt, which the public is obligated in theory to pay off one day. The result is a class system in which 0.1% of the population gains the bulk of the benefit of economic productivity gains and public spending, A shrinking middle class carries a rapidly increasing tax burden and debt load, and a rapidly growing underclass is kept placid with government benefits.
Things go on until they can't. Exponentially increasing debt in the presence of declining economic growth, ultimately, economic retraction, will end catastrophically, if it is not managed.
No question about the facts, but disagree about the predictions. Ther may be crises, but they will managed, so as no to kill the cow while it can still give some milk. They may starve it gradually out of greed, and thus end up hurting themselves; but at worst the world wil become a huge Bangladesh rather than a huge Somalia.
The only way to manage this landing is calculated, systematic debt destruction.
Brazil has a huge public debt, that simply cannot be paid off. If it wasn't past my bedtime I would look for figures, but it passed a trillion dollars many years ago. Currently some 50-60% of the government's revenue goes into paying interest of that debt; but that is only part of the interest due, so that the principal just keeps growing. The last time the government actually borrowed money was perhaps in 1999, when the debt may have been 1/10 of today's, or less. Since then we have been paying all that interest to the banks in exchange of nothing, merely for their kindness in letting us give them only 60% of our taxes, instead of perhaps 90% or 120%.
Indeed, the just and smart thing to do would be to destroy that debt: tell the banks 'fuck you, we already paid our debt with inerest many times over, we owe you nothing, rather you owe us'. That is what Argentina partly tried to do onec and is trying to do again, and you may have known the result.
Unfortunately the banks effectively own the stealth bombers and nuclear missiles. When Lula ran for President in 2000, he had to pledge that he would honor the debt and not try to do what Argentina did. Lula and Dilma managed to convert some of the debt to less expensive loans, but that only slowed the rate of growth, not make it shrink. Dilma lowered the prime rate from 18% to 9% per year, but the bankers swore to overthrow her, and she was orced to backtrack and raise the rate again. And so on.
The money is debt. It is made of debt. It is a token of debt. It is debt which can only be repaid by creating more debt. The money itself is the very root of the problem. Either the system implodes catastrophically, or it reforms itself. In either case, debt-based money will cease to exist as it does today.
Yeah, but why would it be different with crypto? If crypto gets widespread use in the economy, banks will create "virtual bitcoins" just like they now create "virtual dollars". Indeed I see already many budding factories of "virtual bitcoins" sprouting all over the place. MtGOX was an egregious example.
But you are ignoring the bulk of the wealth held by society. Most of the value in society is in the interconnections between people, the transactions, transfers, obligations and acquitals which they make. Human capital is not just a matter of skills, but of relationships. Many of those relationships, often the most economically important ones, are mediated by money. Ignoring money would cause you to ignore much of the value in society.
Again, I admit that I was oversimplifying. But one could view the destruction of that "socail network value" as as consequence of the bad redistribution of wealth caused by the collapse of money system, rather than of the collapse itself.
If the government destroyed all currency and all balances on account, I think half the people in the U.S. would be dead in a month.
Supply chains would collapse, and under modern just-in-time inventory management practices, mass starvation, epidemics, and gang warfare would be pervasive.
In the late 1980s, the Brazilian government tried to stop runaway inflation by freezing the funds in all bank accounts above some ridiculous threshold. (Those frozen funds were relased only a year or two after.) The result, not surprisingly, was a deep economic crisis, perhaps the worst that the country ever had. The GNP dropped, comerce shrunk, people lost jobs, companies large and small closed (except the banks, of course). Fortunatey I wasn't in the country at that time, but I have friends who had just sold their home in order to buy another, and had their money trappped in the bank. Poverty increased, public services worsened, and crime increased --
but the country did not collapse, there was no mass starvation or pervasive gang warfare, not epidemics (at least not much worse than usual). People and companies found workarounds to the bank freeze, sold on credit or paid with cash, and the government was forced to compromises; so most of those social and economic interconnections did not get to be broken.
Based on that and other examples, I believe that to get a complete collapse of the society one needs something much more powerful than merely messing with people's bank accounts. Like an invasion by a foreign power, external financing of domestic terrorism and sabotage, a civil war, or collapse of real economy iitself -- as perhaps happened in the Mayan civiization, the Roman Empire, or the USSR.
I don't see any of those things happening in the US any time soon. I was in new York last year, for a couple of weeks, and now I wonder whether the doomsday prophets are perhaps posting from another planet....
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