Social Security? Nope, bigger than that - capitalism.
I'm not some kind of Communist. I'm not a wild-eyed lefty, either; I'm a moderate swing voter, and capitalism has been good to me. There are a lot of great things about capitalism. But I've come to the conclusion that it's unsustainable, for the same reason a Ponzi scheme is: it requires constant growth, or it collapses.
This time of year, you hear retail sales reports every week. Usually, it's something called "same-store sales" - a comparison of the sales this year vs. last year, at stores open at least a year. A big increase is good. No change is bad.
Why should that be? Why is it that no matter how well a store did last year, it's expected to do even better this year? Of course they don't want to lose sales, but what's wrong with staying the same? Why are corporations expected to show growth every quarter, year after year? The answer goes to the very heart of capitalism.
Modern monetary systems are based on debt. When you go to a bank and take out a loan, the money they give you is actually the deposits given to them by their other customers. They don't have to own the money they lend. They have essentially created the money they loaned you, with a few strokes of a loan officer's pen. Robert Kiyosaki, author of Rich Dad, Poor Dad, put it this way:
They Don't Need Your Savings
Besides, banks really do not need your savings. They don't need much in deposits because they can magnify money at least 10 times. If you put a single $1 note in the bank, by law, the bank can lend out $10 and, depending upon the reserve limits imposed by the central bank, possibly as much as $20. That means your single $1 suddenly becomes $10 or more. It's magic! When my 'rich dad' showed me that, I fell in love with the idea. At that point I knew I wanted to own a bank, and not go to school to become a banker.
- The Cashflow Quadrant
Of course, this means that if all the customers decide to withdraw their money at the same time, the bank won't be able to pay them. This sort of "run on the banks" happened in the Great Depression, and because of that, there's now federal insurance on bank accounts. But that doesn't change the fact that the bank is creating money out of nothing when it grants loans. This is also why new banks will offer very good interest rates at first, to attract customers, then drop them down once they are established. Banks do need customers' deposits at first, so they can start making loans.
Banks can make money out of nothing at all, but ordinary people have to work to earn the money to repay those debts - plus the interest. Those compound interest payments mean the economy must constantly grow. More goods must be produced and consumed, more markets and more customers constantly found, more jobs created, or borrowers will start defaulting on their loans.
That is why I say capitalism is a Ponzi scheme. Like the classic Ponzi scheme, it needs a steady and ever-increasing supply of new investors, or it collapses. There has been no shortage of those in recent generations, as we expanded from local economies to the global capitalism we have today. But eventually, the expansion has to stop. In the end, the base of the economy is still natural resources. Bankers can create infinite wealth under our banking system, but backing up that wealth would require infinite resources - which the earth cannot supply.
Usury (charging interest on a loan) was seen as a grave sin in the ancient world. Judaism, Christianity, and Islam all forbid usury. It's not that they didn't think of it; obviously, people were doing it, or it wouldn't be forbidden. But it was seen as bad for the economy and society at the time, and so it was universally condemned. Cato equated usury with murder. A Jew who charged another Jew interest would have all his possessions taken from him. Islam says commerce is permitted, but usury is not. And we all know what Jesus thought of "money-changers."
What changed? Our economy did. We used to think of money as a convenience. Basically, it just made barter easier. It was no different from a bottle of wine or a loaf of bread. If you borrow a bottle of wine from your neighbor, you aren't expected to return more than one bottle. Interest was "unearned money" - income that you didn't do any work for. And people never borrowed money unless they were in desperate straits, so charging interest was seen as exploitative.
It's a very different world we live in now. Borrowing money and charging interest used to be seen as bad things. Now our entire economy revolves around debt and usury.
"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money." - Daniel Webster