In the world of economics, there are two opposing schools of thought. One is the fiat economists who believe that creating credit claims out of thin air on non-existent goods can lead to economic growth. The other school of thought is based on the premise that economic production creates goods, and unbacked credit only reallocates resources from the productive to the parasitic, who create the credit.
The Fallacy of Unbacked Credit Creation: Why Fiat Economists are Wrong
Fiat economists want you to believe that by creating credit claims out of thin air, they can generate more economic goods. But this notion is far from the truth. In reality, economic production creates goods, and unbacked credit just redistributes resources from the productive to the parasitic, who create the credit. By doing so, fiat economists can temporarily create an illusion of economic growth, but this growth is nothing more than a mirage that ultimately leads to economic destruction.
Why Distorting Monetary Systems Only Benefits Parasitic Credit Creators
When a monetary system is distorted by unbacked credit creation, it benefits only those who create the credit, while leaving the productive individuals in the economy with fewer resources. These credit creators are essentially parasites, feeding off the productive individuals and contributing nothing to the creation of goods and services.
Fiat economists often promote the idea that creating credit claims out of thin air on nonexistent goods creates more economic goods. This theory is flawed, as true economic growth only comes from the production of goods and services. When unbacked credit is introduced into the system, it merely reallocates resources from the productive individuals to the parasites who create the credit.
The Role of Productive Economic Activity in Creating Real Economic Growth
A sound monetary system is one that is backed by real goods and services. It is a system that is based on the fundamental principles of supply and demand. When a good or service is in high demand, its price rises, and when it is in low demand, its price falls. This creates a natural incentive for producers to increase supply, which leads to economic growth.
In a sound monetary system, credit is created based on real savings. When a person saves money, they are essentially putting their money to work by investing in productive activities that generate economic growth. This creates a virtuous cycle of saving, investment, and economic growth that benefits everyone in society.
However, in an unbacked credit system, credit is created out of thin air, with no underlying savings to back it up. This creates a vicious cycle of debt, speculation, and economic instability that benefits only a few at the expense of everyone else.
In conclusion, the notion that unbacked credit creation can lead to economic growth is a fallacy. Economic growth can only be achieved through real economic production, not through the creation of credit claims out of thin air. A sound monetary system must be based on the fundamental principles of supply and demand and backed by real goods and services. Anything less than this will lead to economic destruction and social upheaval.