Why? Simple. Because that system does not necessarily lead to an ever-escalating debt cycle. The reason for this is in law.
Consider: The central bank decides to emit 500.000 units of currency. Let's assume, for simplicity of example, that it gives money to the state in exchange for a bond with which the state is obligated to return 550.000 in ten years' time.
However, after 10 years the central bank decides not to demand that the debt be paid, since there is no reason to tighten the money supply. After a certain time from the day the debt comes due, depending upon the legal system, the creditor cannot demand that the debtor pay. That "debt" will be purely nominal, since, if the central bank were to demand that the state pay, the state could claim the obligation has expired.
The rest I agree with. Bretton-Woods is proof that the world can agree on lower economic growth due to the curbing of the worst parts of human nature in exchange for stability. Iuris praecepta sunt haec: Honeste vivere, alterum non laedere, suum cuique tribuere. - Ulpian, Digestae
Floating currencies aren't all that they're jacked up to be, unless you're a hot money speculator.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
