Government and financial bodies throughout the world habitually set targets for their economies to grow. Did you ever wonder how long national economies can go on growing on this one finite planet? If an economy grows at 2% per year, it will double in 35 years. If it grows at 6.5% as China has been targeting (and surpassing) it will double in less than 11 years. Imagine twice as much human economic activity as we now have. Can our planet sustain this? Do we need to do this? Why would we want to? Why are we doing this?

There’s seldom only one answer to why humans do whatever they do, but a basic driver of economic growth is that the structure of our system requires that it has to grow to keep functioning. This results from the way money is created. Most of the money in the U.S. and throughout the world is created by bank lending (see How is Money Created Today?).

Banks create money when they lend it, and when it’s paid back the money disappears. When a loan is made, only the principal amount is created, but the loan has to be paid back with interest. Plus there is non-bank lending and other financial activities that create debt but not money (for more information, see How Bank-Account Money Works). So we always have more debt than money, and debt grows faster than money. The wider the difference is between debt and money, the more difficult it becomes to pay off debt. As of September 2018 the combined government, household, and non-financial business debt in the U.S. was $50.7 trillion.1 The money supply at the same time (M2) was about $14.248 trillion.2

So we have about three and a half times as much debt as money. This creates a continuous pressure. All those borrowers are in a musical-chairs scramble to get their hands on enough of the scarce supply of money to be able to keep up payment on their debt. There’s never enough money, but since money is created by lending, the only way to get more money into the system is by more borrowing, which makes more debt, which makes a worse scarcity and more pressure.

To feed the expanding debt and the corresponding extraction of value through interest payments, the whole economy has to grow. It has to expand whether we need more goods and services or not. Manufacturing must increase, sales must increase, and consumption must increase. Businesses have to expand to stay afloat and pay the interest that debt-based money bears. Their marketing departments are furiously dreaming up more and more clever ways to convince more and more people that they need to buy more and more stuff—stuff that uses valuable resources to produce and then often gets sent to landfills a few years later. But we have to do this to keep the economy going.

Even though a lot of us know that it makes no sense to try to grow endlessly and overgrow the only planet we have, from a money perspective we can’t help it—we live in a grow-or-die system.

However…we don’t have to do it this way. There’s a smarter way to do money. The Alliance For Just Money is working to change the money system so money is created without debt and doesn’t force us to grow beyond our means (see The Just Money Solution).

Join us. Get Involved

1 Federal Reserve Statistical Release, Z.1, Financial Accounts of the United States:

2Federal Reserve Statistical Release, H.6, Money Stock Measures:


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