Is Your Money Growing or Shrinking?

Written by Stephen Outram Tuesday, 18 October 2011 10:19

Have we misidentified and misapplied growth, a key driver for making money, as debt?

Becoming wealthier is currently based on the concept of growth-over-time as its driver. For example,

• buy a house and over time its value increases so that when you sell, it appears you have made a profit
• buy shares in a business via the stock market; as the business grows so does the value of your shares
• gross domestic product (GDP) is a measure of the economic growth of a country
• adding-to or growing your superannuation fund to have sufficient money when you retire

So, what happens when growth slows, stops or becomes negative?

Isn't that what is happening now? Many of the developed countries are reporting low or zero growth in terms of GDP; stock markets have returned little over the past 10 years, unemployment is high, the debt of many people's mortgages is greater than the value of their homes, in the United States interest rates are near zero, etc.

Has growth, as a driver for becoming wealthier, worked and is it really debt-in-disguise? Has a large part of the boom we've experienced been fuelled by greater and greater levels of debt (credit) and is now the time to pay the piper?

Or is now the time to create something completely different?