3.1. The orthodox view and critique

Since Adam Smith, orthodox economists have assumed a far-reaching independence between real and nominal variables, regarding money merely as a neutral lubricant. Unlike previous views [30], classical economists assumed that due to a constant AS an expansion of the money stock merely increases prices and not AD, whereby the purchasing power per monetary unit decreases and money growth is completely neutralized by inflation with a time lag of a few years (cf. reproduced quote from I. Fisher in S4 Appendix). For this neutrality assumption, they refer to the classical Quantity Theory of Money (QTM), which states that the money stock M multiplied by the velocity of money V is equal to the price level P multiplied by the aggregate volume of transactions T in an economy [32,77]:

Note: Many economists shorten the QTM by using the aggregate volume of real production output O [1^{p. 490},79] labeled as Q) or the real national income Y (alias real GDP) instead of T [23^{p. 557},80^{Appendix I},81,82] and formulate: M×V = P×O or M×V = P×Y. However, both equations do not include the transactions and price developments of assets, because O and Y do not record the dealings of existing assets (e.g. purchase of land, shares). Moreover, in the case of Y, the national total income already includes the inflation-adjusted price level for the production output (Y = P_GDP×O), which is why the actual formula here is M×V = Y.

The QTM is a convincing approach to describe the relationship between the money supply and money use as well as prices in the economy. However, it does not necessarily imply that money growth is almost completely neutralized by inflation. Because if the number and the volume of transactions T increase, then prices must rise more slowly than the money supply if the velocity of money in circulation does not increase sharply. This is precisely the case according to the empirical data. Although empirical studies have acknowledged a positive correlation between the nominal money growth and inflation, the rates of money growth and inflation are moving at different levels [81,83–88].

The empirical results show that long-term inflation is several percentage points lower than money growth in most of the countries studied. The 45-degree line of correlation for the average rates of change for money quantities and price levels calculated by McCandless and Weber (83) for 110 countries from 1960 to 1990 shifted by about 5 percentage points towards monetary growth rates, which can be clearly seen at the starting point with 0% inflation (see reprint Fig A in S3 Appendix). Similar shifts were observed in the studies by Vogel [87] for 16 Latin American Countries (reprinted in Lucas [86^{Figure 1}]) and Barro [88^{Figure 7.1}] for 79 countries (restated in Teles and Uhlig [81^{Figure 1 and 2}]). The development in the United States from 1867–1995 also indicate higher monetary growth rates over longer periods [84,85]. This corresponds to the data for the USA between 1961 and 2016, where money growth was 3.42 percentage points above the development of the CPI, but also to developments in China from 1991 to 2016, where money growth even exceeded inflation by more than 15 percentage points (see Table B in S2 Appendix). Global trends show that between 1971 and 2016 the growth rate of Broad Money was 8.94%/a, while the global GDP deflator used by the World Bank was only 4.05%/a, which corresponds closely to the Consumer Price Index (CPI) of the USA of 4.03%/a (see Table A in S1 Appendix).

The divergence between money growth and (consumer) inflation is based on two cumulative effects. One effect is the time delay in price adjustments to changes in the nominal money supply. This has also been recognized by neutrality advocates, who assume that it takes about 2–3 years to adopt prices to the money supply changes due to several reasons (e.g. long-term price and wage agreements, market imbalances) [1,23,53,77]. However, the alleged time period completely negates the fact that in reality the money supply does not grow on a one-time basis, but constantly, resulting in a permanent and cumulative delay.

The other more significant effect is the steady expansion of the production output as well as the supply of assets [71,89], whereby among assets, the volume of shares, bonds, collateralized debt obligations as well as build-up land (see Fig 1) and gold in particular increased [5,35^{p. 114–119},90,91]. Consumer inflation rates are lower than money growth because production output has expanded over 3% per year in real terms since 1950 [5] (cf. Fig 1 and Table B in S1 Appendix), so that the volume of goods and services has steadily increased. Consistent with the QTM, the nominal growth of the money supply of 8.94%/a between 1971 and 2016 is not completely neutralized by inflation resulting in an exponential real money growth of about 4.5%/a (see S1 Appendix).

Due to the fact, that the production output O does not comprise the asset trading T_Asset and that the developments in asset prices P_Asset are not included in the calculation of inflation rates for GDP goods and services (P_GDP), the QTM formula should be written as follows:

If we rearrange this equation according to P_GDP, it becomes clear that the (consumer) inflation of the production output prices does not only depend on the money supply. The Quantity Theory of Money therefore explains very well why inflation rates are lower than the rates of money supply growth:

All in all, the orthodox belief in an almost complete neutralization of money growth is empirically disproved, as inflation rates lag behind the growth rates of the money supply, not only in the short, but also in the long run. Since 1950, the growth rates of the money supply are on average about 5 percentage points higher than consumer inflation. This “minor” difference between growth rates means that the gap between the money stock and the price level increases exponentially over the years (cf. Fig B in S3 Appendix). As a result, the real money supply also grows exponentially with major implications for the real economy [34,35,92].

This raises the question as to whether the exponential growth in the money supply can stimulate a permanent expansion of the real economy (see section 3.3) and why production output on a global level has been able to grow for such an unusually long time (see section 4).

3.2. The heterodox view and critique

Since Keynes, heterodox economists reject this classic dichotomy and assume that money is endogenous and therefore not neutral for the real economy, whereby the money supply is not the cause but the outcome of economic growth, which increases the demand for liquidity [24,50–52,56,60,65,78]. J.M. Keynes argued that AS can be extended to full employment if there is unemployment, so that AD, which has increased as a result of higher liquidity, is matched by a higher supply (see reproduced quote from Keynes in S4 Appendix). Due to these changes in the real economy, prices do not rise to the same extent as the money supply and the purchasing power of money declines less by comparison. Neo-classical economists adopt this assumption in the AD-AS model and suppose that the expansion in money supply and the corresponding lowering of interest rates increases AD and thus due to growing investment AS expands until the natural unemployment rate reaches the potential production output and any further monetary expansion then only raises prices (Fig 4a) [1,23,53,61,77].

Download:

• PPT
  PowerPoint slide
• PNG
  larger image
• TIFF
  original image

Fig 4. Effects of the money supply expansion in an AD-AS model according to a) Neoclassical assumptions and b) assumption of a money-nature nexus.

In Fig 4a), aggregate demand AD increases with monetary expansion, while potential output remains constant due to the natural unemployment rate, so that when full employment is reached, only prices increase. In Fig 4b), due to the financial investments in technical progress and resource exploitation, potential output will also increase, which is why the aggregate supply can grow in line with growing demand, while prices only rise moderately. Fig 4a) own presentation according to Samuelson & Nordhaus [1^{p. 488}]. Fig 4b own presentation. AD = Aggregate Demand; AS = Aggregate Supply; E = Equilibrium Point of AD-AS; PO = Potential Output.

https://doi.org/10.1371/journal.pstr.0000095.g004

Unlike Keynes, who merely questioned and corrected the classical assumptions on the dynamics of individual QTM variables, post-Keynesian economists dismiss the QTM arguing with the endogeneity of money [36,60,93,94]. They argue mainly on the basis of the Monetary Circuit, according to which credit money is only created on the basis of credit request and disappears when the loan is repaid, which is why the money supply is only increased temporarily—almost as an aid or catalyst (cf. the summary quote from W. Godley [95] in S4 Appendix) [51]. This Monetary Circuit is to be distinguished from the circulation of money in the economy as in Fig 2. For heterodox economists, this circuit with the creation and extinction of deposit money is the reason why the economy drives the money supply and not vice versa. However, the extinction of deposit money accounts at the end of the circuit neither diminishes its function as a medium of exchange for investment or consumption nor its transfer to other market participants during its temporary existence phase. In this phase, the corresponding debt only reduces the net wealth of the debtors in their balances [66]. Furthermore, the growth effects of the money supply in the economy rise as long as the amount of credit-based deposit money increases in line with the growth of bank credit volumes (Fig 1). Thus, so far, the aggregate Monetary Circuit has not yet been closed in most countries all over the world.

Also their argument, that “the rise in production takes shape in the mind of producers before money is created and is effectively realized when credit is granted and money is created to finance it” [78] is misleading because as with all economic exchanges the relationship between liquidity demand LD and liquidity supply LS is interdependent [35]. Without a corresponding supply of money, the envisaged demand simply remains an idea with no prospect of realization. Thus, without growing demand for liquidity there would be no creation of deposit money; but without the creation of new money by central and commercial banks, there will be no additional liquidity to expand production or consumption. The inflation-adjusted quantity of money and the possibilities of its extension are thus crucial for the realization of investment and consumption desires [34,35,96] and their exclusion in most growth theories (cf. [24]) is incomprehensible. The decisive intermediary between demand and supply is the interest level IL for liquidity (LD = IL×LS), the price level P for goods, services and assets (AD = P×AS) and the wage level WL for labor (Labor Demand = WL×Labor Supply) (cf. Fig 3).

By overestimating the question of the exogeneity or endogeneity of money or money creation [35]⁹⁰, post-Keynesian economists underestimate the economic and ecological significance of the quantity of money recognized by the state as a means of payment, which Keynes himself still saw [79]^Ch.21. Post-Keynesian economists act as if other laws of economics apply to endogenous money. However, exogeneity or endogeneity is merely a question of perspective and not of the economic effects of money: Money is endogenous at the state level, as today the legislative of states create the respective national currency for their economies and allow central as well as commercial banks to put it into the economy as cash, reserves or deposit money. For the national economy and the free market on the whole, state-accepted deposit money is endogenous due to commercial banks create this money. However, for the level of non-banking corporations and all households both cash and also deposit money remains an exogenous quantity, which they are not able to create. They can only acquire it in exchange for work and services, goods and assets or borrowing it in the case of loans [35].

How money is created must therefore to be separated from the question of what effects existing money supply has. For the economy and the people it is not significant by whom or why money is created, but that money (liquidity) is available for the intended investments and consumption.

3.3. Why money growth stimulates the real economy

Due to the circulation of money in an economy (see Fig 2), neither consumer inflation nor asset price increases deactivate money. However, both rising consumer prices and rising asset prices reduce purchasing power in a society, because less can be bought for the same amount of money when prices rise [32]. Conversely, if like in the past the money supply rises faster than prices: the higher the quantity of money compared to the price level, the larger the quantities that can be bought and therefore the higher the aggregate purchasing power of the society (cf. reproduced 2nd quote from I. Fisher in S4 Appendix). The increase in purchasing power not only boosts aggregate demand, but also aggregate financial power for investments in production, infrastructure, resource extraction and assets.

The rising investment volume enables resource extraction and production capacities to be expanded, resulting in an increase in the aggregate supply of goods and services as well as assets (see Fig 1 and S1 Appendix). The Quantity Theory of Money can plausibly represent this effect of the growing money supply by rearranging the equation according to the production output O:

According to this, a growing money supply M or a higher velocity of money V increases production output as long as the expansion in available liquidity is not absorbed [97] by a growth in asset prices P_Asset or asset transactions T_Asset. Existing inflation minimizes output growth but does not bring it to a halt, provided that liquidity in an economy or in the global economy is expanding faster than inflation rates. Unlike in the days of pure gold and silver currencies, for the past 300 years the very cheap creation of money out of nothing has made it easy to expand the money supply (see section 2), as long as governments or their central banks do not restrict money creation or reduce the demand for liquidity through high key interest rates. At the same time, an expansion of production output causes inflation rates to lag behind nominal money growth. As a result, purchasing power and investment power increase in real terms, constituting a self-reinforcing feedback effect.

In contrast, the velocity of money in circulation cannot be increased at will [98]. Therefore, the ideas of Silvio Gesell [99] on the so-called "free money” or”stamp scrip”—with decreasing purchasing power by definition (“shrinkage money”)—and subsequent practical regional monetary experiments could increase economic activity only to a limited extent due to a one-off increase in the velocity of circulation (cf. [100–102]).

Contrary to earlier economic assumptions (see section 3.1 and 3.2), the expansion of production capacities as well as potential output is not (or at most only for a short time) restricted by the available number of the unemployed. On the one hand, global trade has resulted in a global division of labor with a previously non-exhausted and growing number of employable people available [1,35]. On the other hand and even more importantly, labor productivity and total factor productivity (TFP) could be increased on a large scale through automation, upscaling and technological progress, replacing or potentiating labor by physical capital and energy [15,22,25,51,103]. As a result, both actual production output and potential output could be steadily increased (cf. Fig 4b).

However, both the expansion of employed labor, physical and human capital, as well as TFP require a prior expansion of financial resources to pay for the people, assets, equipment, raw materials, and the energy needed to expand production [1,24,50,51]. The enhancement of TFP and of the availability of raw materials and energy is preceded by global financial investments from governments and companies in the exploration and extraction of natural resources [21] as well as in research and development (R&D) [104,105], whereby the influence of R&D investments on productivity growth is generally overestimated [106]. It is estimated that annual investment in resource extraction worldwide accounts for approx. $1 trillion, with a return on investment of $4 trillion/a (equivalent to 7% of global GDP) [107,108]. The exponential creation of liquidity at very low cost has enabled a steady expansion of these investments worldwide [34,35,51,57], also enabling the required maintenance investments, which account for about 10–15% of national income [5].

Overall, in an economy real money growth increases not only the aggregate demand, but also the aggregate supply due to growing investment power [30,33–35,55,57,65]. However, the channels of influence of the money supply are complex in national economies, as almost all economic transactions (i.e. the purchase of mining licenses, land, raw materials, energy, machinery, equipment, consumer goods, services or labor) are carried out with money (see Fig 3). The more money that is available for transactions (liquidity), the more economic activity is possible, when inflation rates are lower than money growth rates.

4.1. No production or consumption without natural resources

The interdependence between production and natural resources is nowadays generally recognized in the economic Production Function:

Due to this function, the production output of goods and services O are primarily determined by the supply of the following factors: physical capital K, labor L, human capital H (knowledge and skills) and natural resources NR (including energy) as well as the available production technology A, represented by technological progress and an increase in total factor productivity [1,23,24,34,51]. Contrary to the former Neoclassical Production Function, which only includes K, L and A [113,114], the modern Production Function recognizes that both human skills and natural resources play a crucial role in production. While the abiotic geosphere provides land and a multitude of raw materials [3,115], the biosphere is responsible for extensive ecosystem services [111,112,116], without which neither production nor human life would be possible. The use of natural resources in modern economies takes place in connection with consumption and at various levels of production:

1. The construction of production facilities, buildings and machinery as well as the necessary infrastructures in a national economy (roads, railways and waterways, electricity and communication networks) requires land as well as raw materials and energy. At the same time, emissions, waste and extensive changes to ecosystems already take place at this stage. This means the greater the expansion of physical capital K, the larger the ecological footprint [3,4,14,15].
2. The provision of goods and services in production facilities requires biological and mineral raw materials as well as energy, generating emissions and waste. Again, the higher the production output, the higher the use of natural resources [16,17,117].
3. The provision of raw materials and energy for production in agriculture, forestry, fisheries, mining and the energy sector (hereinafter referred to as primary production) involves extensive changes to land and ecosystems, as well as causing significant emissions and waste (including greenhouse gases, nutrients, tailings and wastewater) [2,118–120]. Primary production takes up by far the largest areas of land and water [3,121–124], while at the same time requiring a considerable input of energy and raw materials (e.g. for fertilizers, mining machinery, wind turbines).
4. Finally, the consumption and use of produced goods and services has various impacts on natural resources, especially due to the resulting emissions and waste (e.g. the greenhouse gases from cars and heating systems, household waste and sewage). Here, it is also the case that the more goods and services that are consumed, the larger the ecological footprint.

To date, technological progress has increased resource efficiency in primary production, commodity production and consumption, whereas recycling has reduced the use of new natural resources. Nevertheless, the total consumption of energy and raw materials has still not fallen, but continues to rise in correlation with GDP (see Fig 1 and S1 Appendix) [3,15,16]. Among the reasons for this are:

• Rebound effects, since efficiency improvements regularly lead to lower costs in production and operating, which in turn boosts aggregate demand [2,18–20,125,126]. This efficiency rebound effect correlates closely with the money supply, since the aggregate purchasing power of society is enhanced with the cost reductions as long as the nominal money supply is not reduced to the same extent (Fig 6). However, the idea of using higher taxation to counteract cost reduction [125,127–129] fails in macroeconomic terms, since higher tax revenues increase government expenditures [130].
• Physical constraints to resource efficiency, since resource productivity in terms of matter and energy cannot be increased above 100 percent resource use, which corresponds to a complete utilization without any waste, emissions or exhaust heat. Furthermore, when approximating this absolute limit, the productivity improvements that can be achieved from constant effort become smaller and smaller, as with all limited growth processes. Practically, use-efficiency lies significantly below this limit due to the laws of thermodynamics, in particular of entropy [49,131,132^{p. 320}] or as Georgescu-Roegen put it: "The impossibility of using machinery that produces no waste is […] an inherent limitation of the human nature." [133^{p. 191}]. Contrary to the pioneering picture drawn by McAfee [134], in the USA the share of lost energy is even more than two thirds of the generated energy [135].
• Physical and social constraints to recycling, since a 100 percent recycling cannot be achieved due to entropy and the mechanical, chemical, and biological aging processes (e.g., wear and tear, oxidation of metals, decay of plastics to micro plastics due to UV radiation) as well as social misconduct in disposal (cf. [136]). Current recycling rates are 60% for iron and copper, 30% for sand, 16–25% for phosphorus and 15% for rare earths, and 0% for fossil fuels [137^{p. 407}] (cf. also [138^{p. 176},139^{p. 70}]).

Download:

• PPT
  PowerPoint slide
• PNG
  larger image
• TIFF
  original image

Fig 6. The efficiency rebound effect and the money supply.

With the increase in resource efficiency NRE to NRE´, more goods and services can be produced and consumed with the same amount of resources NR. Since the aggregate demand AD increases with a constant money supply M because of the rebound effect to AD’, the aggregate supply increases to AS´ and the resource savings NR’ are small. The efficiency gains are fully converted into resource savings NR^s when the money supply M^s decreases and thus AD remains constant despite efficiency-related cost reductions. Conversely, if the money supply increases to M^g as in reality, then AD grows to AD^g and NR to NR^g, which is possible due to the efficiency gains NRE’ and the expansion of the potential production output PO to PO^g due to growing investment in resource exploitation, increasing AS to AS^g. Own presentation. Q = Quantity; AD = Aggregate Demand; AD^g = unrealizable AD^g; AS = Aggregate Supply; M = Money Supply; PO = Potential Output; NR = Quantity of Natural Resource Consumption; s = sustainable; g = growth; NRE = Natural Resource Efficiency (resource consumption per product as a function of resource price).

https://doi.org/10.1371/journal.pstr.0000095.g006

Thus, the use of natural resources is a key factor of production and can only be substituted to a very limited extent by human labor or skills. Its long-standing absence from the economic Production Function is responsible for many economic and social misconceptions about unlimited growth.

4.2. No increase in production and consumption without growing money supply

The economy and real GDP can only grow if the supply of goods, services and assets as well as the demand for these items grow by the same amount as far as possible. Otherwise, too much increase in supply will lead to deflation whereas too much increase in demand will cause inflation.

In monetary terms, this means that both consumer spending and financial investment in production and resource extraction must increase. In the global economy, this is only possible if the global amount of money expands, since unlike in national economies, no foreign investment or export surpluses are possible on a global scale (see section 2). The exponential increase in the global money supply has been possible due to the creation of money out of thin air.

Growing money supply increases economic activities within an economy as well as globally, since money growth is to date neither neutralized by inflation nor a merely temporary phenomenon of a Monetary Circuit (see section 3.1 and 3.2). Similar to the standard model of mutually balancing economic flows, the Production Function excludes money growth as a factor. The expansion of financial investments is hidden in the expansion of the dynamic quantities A, K, L, H and NR. However, if an expansion of financial investments globally is only possible through an expansion of the total money supply, then money creation in the global economy is the decisive reason for the expansion of physical capital, paid labor, available natural resources, and the increase of technical progress and human capital (see section 3.3). Even in national economies, the expansion of the money supply significantly boosts productive investment [50].

In order to highlight this importance for the growth of production output, the Production Function should be supplemented by the factor money creation MC, taking into account that money creation is distributed between production and demand for goods, services and assets (MC = MC_Produktion+MC_Consumption+MC_Asset). The production equation then could look as follows with respect to the production increase O_t+1:

4.3. Self-reinforcing money-nature nexus

If money expansion promotes the growth of production and consumption (4.2) and this economic growth increases the use of natural resources (4.1), then there is also an impact relationship between the money supply and the use of resources (cf. Fig 3). This relationship is not one-way, but reciprocal and self-reinforcing and can be described as follows (cf. Fig 5):

• The nominal expansion of the money supply increases the demand for natural resources, but at the same time enables an expansion of investment in the exploration and exploitation of natural resources.
• The expansion of resource availability keeps the price of resources from rising, or at a slower rate than the money supply, while allowing production output to expand.
• The expansion of production output and resource availability prevent the prices of goods and services from rising as fast as the money supply, leading to an inflation-adjusted increase in the money supply and aggregate purchasing power.
• The increase in the money supply and aggregate purchasing power in real terms steadily enhance aggregate demand, so that firms continue to expand production and resource extraction by extending borrowing, which further increases the money supply in nominal terms as well as resource extraction.

It should be emphasized that there is an imbalance in this money-nature nexus. While the money supply as an artificial, immaterial construct can be expanded at will, the earth’s natural resources are absolutely limited. Even the steady input of solar energy is limited by the size of the Earth. If production output depends considerably on the use of natural resources and ecosystem services (see section 4.1), then without an expansion of the natural resource availability, money growth would only raise inflation rates, since production output could only be increased to a very limited extent through advances in resource efficiency and recycling. However, until now and contrary to the orthodox Hotelling-rule, the exploration and exploitation of raw materials and energy has been steadily increased through financial investment and technical progress by expanding or intensifying mining, drilling, agriculture and forestry [15,16] (Fig 1 and S1 Appendix), which is why resource prices remain low despite a growing demand in reality [16]. Additionally, many ecosystem services can still be used for free [4,57]. Therefore, growing investments in resource exploitation and R&D, not only increase production and TFP, but also potential output [50,51], keeping inflation low according to the AD-AS model (Fig 4b).

Already at the beginning of the Industrial Revolution J.W. von Goethe described in his dramatic work Faust [31] how the expansion of the money supply increases investments in production and resource exploitation through fiat money and how this simultaneously prevents inflationary development by matching the growing money supply with a correspondingly growing amount of real values (land, raw materials, energy, produced goods), giving the inherently worthless paper notes or immaterial deposits a stable monetary value [35,140]. This self-reinforcing relationship termed H.C. Binswanger as “growth spiral” [34].

The money-nature nexus describes the relationship between the total quantity of money and the total use of resources in an economy or in the global economy. Since money circulates within the economy, the money supply therefore determines the total circulation volume that can be used for economic transactions. The money-nature nexus does not describe the use of resources in individual economic transactions. The latter can have a quantitatively and qualitatively different ecological footprint depending on the scope and subject matter as well as on interests, incentives and other individual reasons for decision-making. For an ecologically sustainable global economy, only the total quantity of money is decisive, while the quantity per capita is of relevance for the social question of the distribution of wealth and the individual use of natural resources.

The money-nature-nexus can be expressed by combining the Quantity Theory of Money M×V = P_GDP×O+P_Asset×T_Asset (see section 3.1) and the generally recognized Production Function O = A×f(K, L, H, NR) (see section 4.1). However, with regard to the overall ecological impact of mankind I_ECO, a distinction must be made between the resource use through the production output NR_GDP and the direct resource use through subsistence activities NR_Subsistence without any commercial transactions (I_ECO = NR_GDP+NR_Subsistence). The money-nature nexus is restricted to NR_GDP. The monetary influenced resource use at a certain point in time can be expressed by the following formula:

4.4. Empirical visibility of the money-nature nexus

According to the QTM formula, real GDP and thus production output as well as global demand and supply of raw materials and the GHG emissions, have been steadily increasing worldwide over recent decades in line with monetary growth, while at the same time biodiversity and thus the quality or quantity of ecosystems have been steadily declining, and inflation has been significantly lagging behind monetary growth (Fig 1 and Table B in S1 Appendix). The increase in global GDP has been made possible by the expansion of money supply worldwide by central and commercial banks through money creation out of nothing [34,35,50,66]. Rising national incomes accompanied by rising aggregate demand and production are driving the increase in raw material consumption as well as ecological footprints [16,115,141–143]. Between 1990 and 2008, with every 10% increase in GDP, the average national material footprint of 186 countries has increased by 6% [17]. Therefore, countries with a high GDP per capita also have a high Ecological Footprint [144]. According to Beck et al. [50], expanding credit to households and businesses by up to 109% of GDP generates economic growth. Since an expansion of credit volumes is enabled globally by money creation alone, the money supply increases along with credit volumes (see Fig 1). The fact that nominal money growth was considerably higher than GDP growth and resource utilization (see section 1 and S1 Appendix) can be plausibly explained by the asset price inflation and the liquidity-asset rebound effect (see section 2).

The money-nature nexus became highly visible in the 2008 financial crisis, when a global shortage of liquidity from the commercial banks led to a decline in production and consumption [145], but also in the use of natural resources (e.g. raw materials, CO2-emissions, built-up land, available fishing biocapacities) (see Fig 1 and Table B in S1 Appendix as well as [146^{p. 22 regarding global resource trading}]), until growth resumed in 2010 due to massive liquidity injections by central banks and increased government spending. Despite a decline in the money supply, the bursting of the Dotcom Bubble in 2000 did not have a major impact on production, consumption and resource use, as particularly the trade and prices of intangible assets were affected.

All in all, the money-nature nexus appears billions of times every day around the world when companies, households or governments exchange cash or deposit money into newly produced goods or services that have been made by using natural resources, including energy. As with national GDP, the higher the individual income, the higher the resource use [27,28]. Global analyses show that in 2015, the world’s richest 10% were responsible for 49% of CO₂ emissions, while the poorest 50% emitted only 7% [29]. Material desires do not seem to be limited [147] but grow with available liquidity (cf. [148,149]). Boosted by the low interest rates on loans worldwide and exponential money growth, e.g. in Europe the production of superyachts grew by 228% from 1998 to 2008 [150]. Even after an individual saturation of even relative needs [147] has been reached, money deposited at financial institutions or invested in companies continues to promote the use of natural resources.

Data availability

The Fig 1 in the main text as well as in the supplementary information the Figure A in S1 Appendix and the Figures A to D in S2 Appendix are based on publicly available sources. The data is available through the references [144,151,154–158].