Illuminating the Hidden Forces of Our Monetary System

Interview with Helmut Creutz on the English edition of his book, The Money Syndrome

What do readers learn in The Money Syndrome that they do not read in standard economics books?

Readers learn everything essential about money and its functions. You might wonder why that should be of interest to you. You might say that you deal with money on a daily basis, and that there is nothing left for you to learn. Yet, most of us do not grasp the problematic effects of our contemporary money system. Above all, it is the aim of the book to educate readers about the systematic flaws of a monetary system that operates with permanently positive interest rates. And that is something you do not normally read about in standard economic textbooks or magazines. By the way, an economist classified The Money Syndrome as a standard work immediately after its release in Germany. Anyway, while reading the book, you will learn in detail that:

• Financial assets accumulate exponentially as a consequence of the compound interest effect.
• The indebtedness of private and public households and the economy must grow correspondingly, as financial assets must flow back into the economy as credit.
• Interest flows grow similarly in the course of escalating financial asset and debt accumulation. However, financial assets are unequally distributed.
• Consequently, the escalating interest flows reallocate capital from those parts of the population that pay more interest than they receive to those that receive more than they pay.
• The divide between the rich and poor widens.
• Economists and politicians only regard economic growth as a solution to prevent the divide between the rich and the poor from widening.
• However, given the finite resources of this planet, constant economic growth – demanding a perpetual increase of production and consumption – is ecologically unsustainable.
• Above all, The Money Syndrome not only provides an in-depth analysis of the negative effects of constantly positive interest rates, but also presents a solution: Stabilize the monetary flow by introducing carrying costs to money, as argued by Silvio Gesell.

How did you come up with the idea of writing the The Money Syndrome?

I have been active in environmental and peace initiatives since the 1970s. Back then, I was already looking for reasons why politicians and economists demand constant economic growth despite its devastating consequences. In 1980, a reader of my books gave me a hint. He claimed that underlying processes in our monetary system explain why we ‘need’ perpetual growth. Initially, I was very skeptical. However, trying to show the reader that he was mistaken, I actually discovered that plenty of statistical evidence suggested that he was right! In 1984, I published my first research results in the “Journal for Social Economy” (“Zeitschrift für Sozialökonomie“). One year later, I published a more detailed account of my findings in the article “Growth Till Self-Destruction” (“Wachstum bis zur Selbstzerstörung“). Further research and specification of my ideas led to the first edition of The Money Syndrome in Germany in 1993. Since then, the edition has been revised and translated into several different languages. The work for the French publication was finalized in 2008.

What surprised you the most while researching and writing The Money Syndrome?

Examining statistical series, I was very surprised about the developments in the real economy compared to the expansion of financial assets and debts. Capital and debts grow exponentially; that is, much faster than the real economy. However, this has profound social implications. You can read about that in more detail in the book. I was also very surprised that, in the standard economic textbooks I’ve read, very few economists have dealt with the topic. Actually, Keynes was the only mainstream economist I found who discussed the negative effects of our monetary and interest system in any depth. Interestingly, Keynes based his statements on findings by the economic maverick Silvio Gesell. Gesell had already written about the deficiencies of our monetary system 100 years ago! Nonetheless, university professors were not concerned with the redistribution of capital through positive interest rates. That situation has changed a little bit. For example, Professor Jürgen Kremer has recently proven my assertions with the help of long-term calculation models.

What do you expect from the English edition of the book?

I hope that social activists, environmentalists, and economists will gain new insights when reading the book. My work illustrates that systematic errors inherent in our monetary system prevail. These must be removed to effectively promote social justice and environmental sustainability. Next, I hope that The Money Syndrome will contribute to the discussion about ways to promote interest rates oscillating around 0%. Such a discussion was launched last year by professors such as Greg Mankiw from Harvard and Willem Buiter from the London School of Economics. In saturated economies, 0% interest rates are not only necessary to stabilize economic activity, but also to prevent a further accumulation of capital and explosion of debts due to the compound interest effect. In short, I hope that the book will help spread the knowledge about how economic stability, social justice, and peace in this world are essentially threatened by systematic errors in our monetary system. Our future survival requires that we recognize this mistake and correct it!

The interview was kindly provided by Felix Spira