Debt-backed currencies require recessions. Without them you are correct. Perpetual growth is of course impossible, as the rock we live on is finite.
But recession, what used to be called “The 7 year business cycle” (before we tried to eradicate it) served to flush the weakest borrowers and lenders. It caused them to go bankrupt, and in doing so both their money AND DEBT was extinguished.
They serve as the natural and proper elimination of the imbalance that otherwise grows until collapse.
With the economy left alone on a debt-backed system, this works. It did for about 50 years, and will again if left alone. It did, in fact, for the entire period from 1789 until the 1980s, with interruptions when we tried to get rid of recessions, through both hard money and debt-backed money.
Such attempts to prevent recession always fail.
It is a natural thing to try to avoid pain. But in all economic systems where capital may be loaned at interest, no matter how you structure it and no matter how you back your currency, recessions are how you prevent the exponential function from eventually assraping you.
The answer is not found in commodity-backed currencies because the problem doesn’t lie there. The problem lies in the belief that one can avoid recession. The only way one can eradicate the need for recession is to eliminate the lending of capital. As soon as you allow capital to be lent, the lender will demand a price for his capital, which means an interest charge since there is always time value to capital – and as soon as that interest charge shows up, you’re back to this dynamic – like it or not.
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“The ultimate result of shielding men from the effects of folly is to fill the world with fools.” -Herbert Spencer