Credit Beats Growth: Credit in Modern Capitalist Economy in Crisis

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Titel: Credit Beats Growth: Credit in Modern Capitalist Economy in Crisis
Autor(en): Pauly, Ralf
ORCID des Autors:
Zusammenfassung: Finance is increasingly dominating the entire economy and determining social life more and more. Credits expand our opportunities. They increase companies' return on investment significantly, expand states' and households' ability to spend far beyond their current income. The follow-up costs of credit financing weigh heavily on the economy and society. They can only be borne if there is sufficient future growth. The penetration of credit financing throughout the economy is so strong today that one can speak of a credit economy in a modern capitalist economy. This credit economy is unstable and dependent on the support of the state. The instability became visible in the financial crisis of 2008. In it, central banks have set themselves de facto a new goal: financial stability. This has given rise to a state-supported credit economy. To ensure stability, central banks intervene massively in the financial market. As a result, credit is growing, but economic growth is lagging behind. This has serious consequences. The evolutionary balance between "credit" and "growth", on which society's confidence is based, is in danger. It is not only the financial system that has changed; fundamental changes are on the horizon also in economic production. On the one hand, it must be more environmentally friendly, and on the other, it is becoming increasingly clear that the era of globalization is coming to an end. The world economy will enter into an international competitive struggle between different areas of value. Both transformations will be costly and will make production more expensive and increase the need for capital considerably. Accordingly, the evolutionary imbalance between credit and growth will rise. This imbalance leads to a serious loss of trust in the foundation of the market economy. In order to secure trust and master the two upcoming transformations, the state, or more precisely the central bank, must also transform itself. The central bank can add a second orientation to its hitherto one-sided focus on the financial system by supporting the development of civil society. In doing so, it can use direct financial transactions to finance important civil society projects in a targeted manner without increasing the volume of credit. With better financial resources, citizens can dare more and thus contribute to growth in the long run. In this way, credit and growth can remain in balance even in a rapidly changing economy.
Schlagworte: Financial stability; Credit and growth out of balance; Economic instability and social inequality; Follow-up costs in finance and production; Transition to green production; Changing public policy
Erscheinungsdatum: 15-Mai-2023
Lizenzbezeichnung: Attribution-NonCommercial-NoDerivs 3.0 Germany
URL der Lizenz:
Publikationstyp: Preprint [Preprint]
Enthalten in den Sammlungen:FB09 - Hochschulschriften

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