As a rule, the cost of finance is always rising.
To the extent that finance is nonproductive, it increases the cost but not the volume of output.
This creates cost-push inflation or, if inflation is prevented, cost-push pressure that must find relief by some other means.
Cost-push pressure which cannot be relieved by inflation is relieved by slowing growth.
To the extent that finance is nonproductive, it slows economic growth.
Long-term growth of finance creates long-term slowing of economic growth.
Long-term slowing of economic growth is indistinguishable from the decline of civilization.
1 comment:
Not only "to the extent that finance is nonproductive".
Also to the extent that finance has grown beyond its economies of scale.
If someone tells you we need more finance, tell them no. Tell them it only looks that way because for the six decades from 1947 to 2007 policy enhanced the availability of credit, encouraged the use of credit, and reduced the funds that are readily accessible for spending, relative to GDP at actual ("nominal") prices.
Policy is irrational. Policy is the source of the trouble.
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