Is our monetary system sustainable?

Nowadays more and more people are concerned about the sustainability issue but it’s quite odd to find that very few attempts have been ever made to apply this concept for the monetary realm. Everybody is quite aware of how devastating the monetary crisis is for any national economy as we’ve witnessed several cases all over the world(Asia in 1997, Russia in 1998, Argentina in 2002…), but it’s quite hard for me to imagine financial analysts debating over how to build up a sustainable monetary system.

Margrit Kennedy, a German architect, is one of few persons in the world who have ever tried to give an answer to this question. She found out that the current monetary system is unfavorable for eco-friendly buildings she was making and she began studying the monetary aspect of our economic system to conclude that it has several structural faults. Here are her key findings from her masterpiece “Inflation and Interest-free Money.

1. Exponential growth

The current monetary system, equipped with the compound interest, obliges our economy to grow forever and even more than before. This phenomenon is uncommon in the natural world, however, for instance human beings stop their physical growth when they become adults, and the economic exponential curve is destined to eat up all the natural and/or human resources before going bankrupt just like the cancer accelerates its growth to end up with killing the whole body.

2.Interest repayment is a big burden for any project

We pay interest not only when we repay our debt but also when we pay for any goods and/or service. Part of your bus fare is spent to repay the bus company’s debt with interest, and Kennedy estimates that the percentage of interest on what we pay amount to about one fourth on average. It’s quite important to notice that this interest makes some eco-friendly projects “unprofitable.”

3.Unfair redistribution of wealth by way of interest

But the most important point of the interest in relation to the economic democratization is that this transfers the wealth from the poor to the rich: Obviously those without money need to borrow it when they need to buy something big(like house or car) and they have to repay the interest in addition to the principal while wealthy ones can make use of this circumstance to enrich themselves even more. Kennedy shows that more than 80% of the population loses money with this system while only a fistful of superrich can earn from this system, raising a question whether a monetary system with such a feature is allowed from the viewpoint of social justice.

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