“But the economy needs growth”: what this objection gets right, and what it does not

This objection usually comes from women who think in economic terms, which is exactly why it deserves a careful answer. It bundles three claims that tend to blur into one: companies need growth, an economy cannot survive falling prices, and without a central bank nobody can help in a crisis. The three are not equally well founded, so we will take them apart.

Falling prices are not all the same

The frightening word is deflation, and it mixes up two entirely different things. One is prices falling because production gets better: technology makes things cheaper, and every consumer gets more for her money. The other is crisis deflation, where an over-indebted system buckles, credit evaporates and demand collapses. The Great Depression was the second kind, a debt problem. Using it as an argument against falling prices as such confuses the illness with the symptom.

The idea that people would postpone buying forever when prices fall is disproved by every one of us, every year. Electronics have been getting cheaper and better for decades, and still nobody buys her phone “next year instead”. Eating, housing and living happen today regardless. The famous downward spiral of consumption has simply never shown up in the industries that could demonstrate it daily.

Why growth does not come out of the printing press

Growth comes from saving, investment and productivity, not from more units of money. More francs do not make Switzerland richer, they only redistribute, towards whoever sits closest to the new money. And everyone who has lived long enough knows the purchasing-power arithmetic: even the hard franc has given up roughly three quarters of its purchasing power since 1960, the dollar far more. That is the price of having technology’s productivity gains continuously overwritten by a growing money supply. Much of life should be getting cheaper. That it does not is not a law of nature. It is a choice.

And the crisis? The part that stands

Now for the objection I respect most: in a panic everyone sells at once, and without a lender of last resort even healthy firms can die of pure illiquidity. In 2008 and in March 2020 the central banks probably did prevent a collapse of the payment system. That should not be argued away.

The honest follow-up question is simply: where did the leverage that nearly exploded come from? It was built up over decades of cheap credit and the reliable expectation of rescue. If you extinguish every fire without asking who handed out the petrol, you get bigger fires. Every rescue lowers the caution for the next round. That is not an argument against the fire brigade on the day of the blaze, but it is one against a system that makes the blaze routine.

And what remains standing of the objection? Quite a bit, and it should be said out loud: under strictly hard money there would be no rescuer of last resort, wages adjust poorly downwards, and no state hands over monetary sovereignty voluntarily. Anyone telling you these questions are all solved is selling you something. But for you personally, that is not actually the question. Bitcoin does not abolish the central bank. It places, beside the existing system, a form of saving that nobody can dilute, and leaves you the choice of how much of each you want. You do not need to want the system gone to understand why an exit is valuable.

• Technology deflation is prosperity, crisis deflation is a debt problem, and the objection mixes the two
• The economy grew strongly under the classical gold standard, including the century's biggest industrial build-outs
• Growth comes from productivity, not from expanding the money supply
• The crisis objection has a true core, and the leverage that makes rescues necessary is itself a product of rescues
• Bitcoin does not replace the central bank, it adds a choice beside it