The problem is the Status Quo only works in a world with plenty of room to expand.

The central illusion of this era is that the Status Quo can be reformed or saved. All we need to do is (or so we’re told):

1. Get money out of politics

2. Re-impose the Glass-Steagall Act on banking

3. Close the tax loopholes exploited by corporations and the wealthy

4. Overturn the Supreme Court decision giving corporations personhood

5. Restrict the Imperial War Powers of the president

6. Restore the civil liberties stripped by post-9/11 legislation

and so on. All good-governance, all prudent, all necessary.

But none of these reforms–or any of the other good-governance tweaks habitually promoted by left, right, center and Libertarian–can save the Status Quo. For what’s wrong with the Status Quo is systemic: tweaking rules and limiting excesses may make us feel like we’ve accomplished something useful, but that sense of accomplishment is illusory.

The problem is the Status Quo only works in a world with plenty of room to expand–a world of virgin resources ripe for exploitation (oops, I mean development), easy-to-extract abundant energy, and an expanding population with rising productivity and little debt.

In this world, there’s plenty of room for everything to expand: resource extraction, energy consumption, population, productivity, income and debt.

This is a world optimized for growth: there is so much material and labor capital available, enormous quantities can be squandered on wars, mal-investment, elite excesses and plain old waste.

The world optimized for growth begins with little or no debt. Debt, as we know, is a way to consume future earnings today. If $1 in income can be leveraged into $10 of debt, the worker earning the $1 can consume $10 of goods and services today, or buy $10 of assets.

The world optimized for growth is also optimized for banks and central states.Banks earn money as debt expands, and government tax revenues explode higher as population, earnings, productivity, commerce and profits all expand.