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Credit creation and the ‘growth imperative’. A quasi-stationary economy with debt-based money

Jackson, TD and Victor, P (2015) Credit creation and the ‘growth imperative’. A quasi-stationary economy with debt-based money [Working Paper]

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Abstract

This paper addresses the question of whether a capitalist economy with interest-bearing money can ever sustain a ‘stationary’ (or non-growing) state, or whether, as often claimed, capitalism has an inherent ‘growth imperative’ which arises from the creation of money as interest-bearing debt. We outline the development of a dedicated system dynamics model for describing Financial Assets and Liabilities in a Stock-Flow consistent Framework (FALSTAFF) and use this model to explore the potential for stationary state outcomes in an economy with balanced trade, debt-based money, and private equity. Contrary to claims in the literature, we find that neither credit creation nor the charging of interest on debt create a ‘growth imperative’ in and of themselves. We show further that it is possible to move from a growth path towards a stationary state without either crashing the economy or dismantling the system. Our model supports critiques of austerity and underlines the value of countercyclical spending by government. Nonetheless, there remain several good reasons to support the reform of the monetary system.

Item Type: Working Paper
Subjects : Centre for Environmental Strategy
Divisions : Faculty of Engineering and Physical Sciences > Centre for Environmental Strategy
Authors :
AuthorsEmailORCID
Jackson, TDUNSPECIFIEDUNSPECIFIED
Victor, PUNSPECIFIEDUNSPECIFIED
Date : 2015
Copyright Disclaimer : © Tim Jackson and Peter A. Victor, 2015 The views expressed in this document are those of the authors and not of the ESRC or the University of Surrey. Reasonable efforts have been made to publish reliable data and information, but the authors and the publisher cannot assume responsibility for the validity of all materials. This publication and its contents may be reproduced as long as the reference source is cited.
Related URLs :
Depositing User : Symplectic Elements
Date Deposited : 04 Nov 2016 12:50
Last Modified : 04 Nov 2016 12:50
URI: http://epubs.surrey.ac.uk/id/eprint/812236

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