Nicolae Georgescu, a well-respected but very pessimistic economist who explained that natural resources degrade over time through economic activity and that earth’s carrying capacity to sustain human populations and consumption levels would ultimately decrease and lead to our extinction.
From what I remember from high school, the first law of thermodynamics says it is impossible to create something from nothing. All products we produce result from the transformation of natural raw materials using energy. Thermodynamics is part of physical science that deals with the relations between heat and other forms of energy, such as mechanical, electrical, or chemical energy, and, by extension, the relationships between all forms of energy.
All human-made products break down, wear out, and eventually fall apart, returning to the environment as waste. The extraction of raw materials from nature and the return of disordered waste is known as throughput. Maintaining existing stocks in the face of gradual decline requires continuous throughput flows, creating even more waste. This physical throughput is essential to nearly all economic processes, including electronic and digital transactions, which depend on some combination of power in the form of electricity or food and tools in the form of paper, pens, computers, or phones, all of which depend on throughput.
The simplest laws of physics and mathematics tell us that the exponential growth of any physical subsystem of a finite system is impossible. Since all economic production consumes raw materials and generates waste (Air, Water and Land), the economy is a physical system. If this is so, then our current economic system, which is capitalism, focussed on infinite growth and profit, is not sustainable when waste becomes so prevalent that it threatens the very people who participate in it, which is, after all, all of humanity.
Infinate growth is impossible. Trees don't grow to infinate height. It's all a balance. To achieve this a complete mind shift is required where natural resource scarcity and waste creation and making it harmless is priced in. The problem however is that our population is growing, creating even more pressure on consumption so something will have to give.
"For capital to accrue, profits must increase over time."
This feels like it ignores the mathematics of compounding that shows us how account balances can grow to infinity, exponentially, over time, if investment earnings are retained and reinvested, instead of being withdrawn for spending. Earnings do not have to increase for compounding to work its magic. They can be constant over time. What is important is that earnings are retained, and reinvested.
This tells us that a charge for the use of money obtained through financing can be a variable cost of doing the work of creating surpluses for sharing through exchange by enterprise, just like supplies, regulatory compliance, the depreciation of capital equipment, payroll, marketing and administrative expenses, all of which are costs of doing business that must be recovered through the selling price.
This shows us that the growth imperative does not come from financing based on sharing in enterprise cash flows. So where does it come from?
It comes from financing as ownership for resale that requires that the selling price go up in order for the financier to extract a profit on sale as its source of compensation for providing equity as ownership for resale.
Only one kind of financing works this way. That is financing through Exchanges & Funds, where large scale financing contracts are securitized into large numbers of legally equal shares that are owned through purchase and sold for a profit in markets for maintaining market clearing prices on such shares. These markets must be liquid in order to attract participants. Sellers must be able to sell. Buyers must be able to buy. No seller can ever get locked into a trading position they cannot get out of; no buyer can be boxed out of a trading position they want to enter into. Price can be uncertain, but availability cannot. To maintain liquidity, these markets rely on volatility and growth in market-clearing prices.
For debt instruments that amortize with interest, volatility is sufficient for market liquidity, because the holder of a debt instrument will be able to get out of that position over time through amortization and interest payments, even if the markets do not delver a buyer for early exit (subject, of course, to default, which causes a loss on the position but at least closes the position out).
For ownership instruments - like shares of corporate stock - that do not amortize and may or may not pay dividends, growth is required. Growth in share price is what lets current sellers sell at a profit to current buyers who expect to sell, in their turn, at a profit, through continued growth.
Without growth, buyers won't buy. Without buyers, sellers can't sell. They get trapped owning shares that are not paying dividends and have no selling price (even at a loss).
Stock markets cannot function if buyers won't buy, and buyers won't buy if prices don't go up.
This is the source and origin of the growth imperative that drives corporate gigantism, which becomes a special pleading for the special interests of market professionals for governmental policies to support GDP growth which drives NPV growth which drives NAV growth which drives AUM growth which drives growth in fees and profits for market makers and the vast ecosystem of related professionals (including economists) who support liquidity and growth in the markets for maintaining market clearing prices on securitized shares in large scale financing agreements.
These special pleadings of special interests are NOT a requirement of capitalism as participation in markets without the need to seek the permission of privileged and entitled aristocrats (or modern day autocrats). It is not a requirement of Finance, writ large, within capitalism.
And it is only a requirement of one modality of finance as a process that:
1. aggregates money set aside by others;
2. deploys those aggregations as money for use by enterprise in doing its work;
3. charges enterprise for the use of that money;
4. shares the charges collected from enterprise with the ultimate sources of the money it provides to enterprise.
The only modality of finance as aggregations for deployment is securitization for share price trading over Exchanges or through Funds.
Nicolae Georgescu, a well-respected but very pessimistic economist who explained that natural resources degrade over time through economic activity and that earth’s carrying capacity to sustain human populations and consumption levels would ultimately decrease and lead to our extinction.
From what I remember from high school, the first law of thermodynamics says it is impossible to create something from nothing. All products we produce result from the transformation of natural raw materials using energy. Thermodynamics is part of physical science that deals with the relations between heat and other forms of energy, such as mechanical, electrical, or chemical energy, and, by extension, the relationships between all forms of energy.
All human-made products break down, wear out, and eventually fall apart, returning to the environment as waste. The extraction of raw materials from nature and the return of disordered waste is known as throughput. Maintaining existing stocks in the face of gradual decline requires continuous throughput flows, creating even more waste. This physical throughput is essential to nearly all economic processes, including electronic and digital transactions, which depend on some combination of power in the form of electricity or food and tools in the form of paper, pens, computers, or phones, all of which depend on throughput.
The simplest laws of physics and mathematics tell us that the exponential growth of any physical subsystem of a finite system is impossible. Since all economic production consumes raw materials and generates waste (Air, Water and Land), the economy is a physical system. If this is so, then our current economic system, which is capitalism, focussed on infinite growth and profit, is not sustainable when waste becomes so prevalent that it threatens the very people who participate in it, which is, after all, all of humanity.
Infinate growth is impossible. Trees don't grow to infinate height. It's all a balance. To achieve this a complete mind shift is required where natural resource scarcity and waste creation and making it harmless is priced in. The problem however is that our population is growing, creating even more pressure on consumption so something will have to give.
"For capital to accrue, profits must increase over time."
This feels like it ignores the mathematics of compounding that shows us how account balances can grow to infinity, exponentially, over time, if investment earnings are retained and reinvested, instead of being withdrawn for spending. Earnings do not have to increase for compounding to work its magic. They can be constant over time. What is important is that earnings are retained, and reinvested.
This tells us that a charge for the use of money obtained through financing can be a variable cost of doing the work of creating surpluses for sharing through exchange by enterprise, just like supplies, regulatory compliance, the depreciation of capital equipment, payroll, marketing and administrative expenses, all of which are costs of doing business that must be recovered through the selling price.
This shows us that the growth imperative does not come from financing based on sharing in enterprise cash flows. So where does it come from?
It comes from financing as ownership for resale that requires that the selling price go up in order for the financier to extract a profit on sale as its source of compensation for providing equity as ownership for resale.
Only one kind of financing works this way. That is financing through Exchanges & Funds, where large scale financing contracts are securitized into large numbers of legally equal shares that are owned through purchase and sold for a profit in markets for maintaining market clearing prices on such shares. These markets must be liquid in order to attract participants. Sellers must be able to sell. Buyers must be able to buy. No seller can ever get locked into a trading position they cannot get out of; no buyer can be boxed out of a trading position they want to enter into. Price can be uncertain, but availability cannot. To maintain liquidity, these markets rely on volatility and growth in market-clearing prices.
For debt instruments that amortize with interest, volatility is sufficient for market liquidity, because the holder of a debt instrument will be able to get out of that position over time through amortization and interest payments, even if the markets do not delver a buyer for early exit (subject, of course, to default, which causes a loss on the position but at least closes the position out).
For ownership instruments - like shares of corporate stock - that do not amortize and may or may not pay dividends, growth is required. Growth in share price is what lets current sellers sell at a profit to current buyers who expect to sell, in their turn, at a profit, through continued growth.
Without growth, buyers won't buy. Without buyers, sellers can't sell. They get trapped owning shares that are not paying dividends and have no selling price (even at a loss).
Stock markets cannot function if buyers won't buy, and buyers won't buy if prices don't go up.
This is the source and origin of the growth imperative that drives corporate gigantism, which becomes a special pleading for the special interests of market professionals for governmental policies to support GDP growth which drives NPV growth which drives NAV growth which drives AUM growth which drives growth in fees and profits for market makers and the vast ecosystem of related professionals (including economists) who support liquidity and growth in the markets for maintaining market clearing prices on securitized shares in large scale financing agreements.
These special pleadings of special interests are NOT a requirement of capitalism as participation in markets without the need to seek the permission of privileged and entitled aristocrats (or modern day autocrats). It is not a requirement of Finance, writ large, within capitalism.
And it is only a requirement of one modality of finance as a process that:
1. aggregates money set aside by others;
2. deploys those aggregations as money for use by enterprise in doing its work;
3. charges enterprise for the use of that money;
4. shares the charges collected from enterprise with the ultimate sources of the money it provides to enterprise.
The only modality of finance as aggregations for deployment is securitization for share price trading over Exchanges or through Funds.