Instances where technological improvements increase energy efficiency do provide growth that supports debt-based fiat currencies which need production growth to prevent collapse.
Can you cite any evidence, though, that this effect is overcoming the general decline in Energy Return on Investment (EROI) expressing itself throughout the economy?
Today’s very low and even negative interest rates are not so much a sign of the end of inflation as a central bank perversion of the important function of market interest rates. When central banks try to substitute low interest rates for a lack of true growth there will be negative repercussions.
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There is a separate problem with investing to improve production in a falling-rate environment. Let’s look at an example. Ostrich farmer Argg the 107th (descendant of the original Argg) borrows money at 6% to build a larger barn and other facilities for ostrich farming. He is making a profit, and all the while the central bank is forcing down the rate of interest. His competitor, Orr the 106th borrows money at 3% to build an even bigger ostrich ranch.
Orr can either buy more ostrich capacity than Argg for the same monthly payment, or else he can build the same capacity for a lower payment. Either way, he has a permanent structural advantage compared to Argg. First, industry was burned down by rising rates. Now industry is ploughed under by falling rates. That the fall in rates leaves in its wake newly created industry (with ever higher debt ratios) misses the point. These temporarily profitable new businesses, loaded up with debt, are not healthy in the same way that a credit-expansionary boom is not a healthy economy.
Another deleterious effect of falling interest rates is analogous to the example discussed earlier about the ostrich egg subsidy. The ostrich rancher becomes dependent on the subsidy and is threatened with bankruptcy when the subsidy is eventually withdrawn. The same thing occurs with falling interest rates.
Falling rates not only encourage more borrowing, but encourage and even demand that one repay the previous borrowing with new borrowing. This is called “rolling the loan.” After some period of time of increasing and increasing one’s borrowing, and never repaying anything, a business’ balance sheet (or a bank’s) becomes weaker and weaker and weaker.