So they have to earn that much more by producing more

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so they have to earn that much more by producing more - since lots of people (and businesses) take out loans each year, - the system overall has to produce enough more than the previous year to repay all those loans with interest - Now the other, and bigger, reason: credit money - banks are allowed by the state to lend more money than they have in deposits - (regulating the percentage of loans they can make relative to deposits – their “capitalization” – is one of the ways that the nation-state tweaks the system to keep it smoothly producing profits) - you deposit $1 in the bank - the bank lends me $9, which are really just numbers in their books - the bank hopes that only a few people at any given time will actually demand a cash withdrawal - this effectively creates new money in circulation - “credit money”, or simply a promise by the bank to pay depositor in the future when they withdraw their money - based on a promise by borrowers to pay back the capital and the interest of their loans - neither of which actually existed at the time of the loan… - eventually, I have to repay the loan with interest: $10 in cash - that actual value had to be created somehow, somewhere - “actual value”, “cash”, and so on are tricky concepts that we won’t pursue here - again, since lots of people take out loans each year,
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Anth 340: Living in our Globalized World F 2011 / Owen: Capitalism p. 4 - the system overall has to produce enough more value than it did in the previous year to pay for all that new “credit money” that simply did not exist before - How can more stuff (new value) be created? - by converting non-monetary things into things that can be sold for money - converting - trees into lumber - underground rocks into metal - quartz sand and rare earths into microprocessors - tasks like child care by parents into services that are paid for - farm labor - done for family consumption (no money, no loans, no interest) - into paid labor producing food for sale (creating profit, paying interest, resulting in growth in the total value or amount of money) - As long as it keeps growing, the system works - Banks create money through loans - Borrowers (especially businesses) use it to buy ever more stuff - Ever more stuff is produced - partially by converting things that were not salable into things that are, or that are salable for more than they were before - This endless growth has led to - real advances in wealth and living standards - advances in technology - but also environmental and social problems - but growth is evidently is not sustainable indefinitely… - The point for this class: Perpetual growth leads to globalization - perpetual growth requires seeking ever more non-monetary resources to convert into money - like natural resources: hence globalizing processes of - colonialism - international mining, logging, transport, etc. of resources - resource wars bring people into contact, flows of refugees, etc.
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