The great financial crises of the past have occurred once or twice a lifetime in every banking society throughout history. Solutions to fix the problems that each crisis of the past exposed have all been like recent ones in one extremely important way. They’ve always provided temporary fixes that set the stage for still greater financial crises to come. That’s a sign that people have been asking for the impossible.
It allows the appearance that earnings from finance can keep growing in proportion to past earnings, without any goods and services involved.
A simple but seemingly valid overview is that our ever failing “fixes”, for our ever greater financial panics, all come from not realizing that our information models of finance are not the economy’s source of value. Models and promises to follow them can indeed extrapolate to infinity. That is not possible for the physical work of the economy that is the only real source of economic value, that the promises of finance eventually need to rely on.
When the economy grows from physically “small” to “big” relative to its resources or its own technologies or social organization, it becomes a trap for our financial system. The financial markets are designed to search for any escape from financial constraints. Investing for rapidly growing returns, when delivering goods and services is running into more complications, draws fast money into self-fulfilling speculative manias. They promise limitless profits, by exploiting gaps between the rules of money and the reality of a changing economy.
Money has real value only when it corresponds to credit for deliverable physical goods and services. The actual physical connection between goods and services and money, and our responsibility for the physical resource uses and impacts caused, are the same. It’s that our “use” of money constitutes our way of communicating our instructions for delivering physical goods and services from exploiting those resources.