What is Wrong with the Global Financial System?

Philip Goodchild

Journal of Interdisciplinary Economics, 2012, vol. 24, issue 1, 7-28

Abstract: In the global credit crisis of 2007–08, the financial system escaped human control and became unstable, with near-catastrophic consequences. The underlying processes driving this instability may be traced to: positive feedback between asset price inflation and increasing leverage; increasing inequity leading to insufficient consumer demand; and the clash between exponential economic growth and the scarcity of primary commodities. These expose fundamental dilemmas that structure economic activity. Since credit is a newly-created contractual relation, while debt must be repaid with money, the global economy is caught in an ever-expanding spiral of debt which, when it reaches its limits, will result in default, devaluation, and inflation.

Keywords: Financial crisis; money; credit; resource limits; E5; G1 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jinter:v:24:y:2012:i:1:p:7-28

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