In his latest Post, Tim Watkins argues that many of the crises now closing in on us share a common root. Our monetary system relies on debt based money. New money appears only when someone takes out a loan. Interest then has to be paid on that loan. This structure forces the economy to expand year after year. If expansion slows, the strain increases. If it stops, the system begins to break.

Watkins warns that the global debt mountain is now at a point where it can no longer be supported. Once confidence falters, a major crash becomes likely. Such a crash would not simply cause a short downturn. It could trigger the rapid unravelling of global trade. Western countries would be hit hard. They have relied on currency dominance to obtain cheap food, fuel and manufactured goods from outside the locality. If that advantage disappears, shortages will follow. The hardship could be worse than the 1930s as even basic needs become uncertain.

He points to the example of the Soviet collapse. When its economic structure fell apart, life expectancy dropped sharply. He argues that something similar could happen in the West if debt based systems fail. This is not a forecast anyone would welcome. Yet it highlights how exposed we have become. Long fragile supply chains depend on cheap credit, cheap energy and political stability. All three are weakening.

Watkins suggests that after such a shock, attitudes may shift. People and the politicians they elect may have to accept that sustainability means living within limits. Managed decline will become necessary. Growth can no longer be the aim in a world of constrained resources and declining discretionary markets. In this new reality, debt based money becomes unworkable. It demands expansion when expansion is no longer possible. It traps households, businesses and governments in a structure that cannot survive the end of growth.

Once the debt based model breaks, something else must take its place. This is where the future begins to take shape. Without large flows of credit, without global supply chains, and without the ability to import essentials cheaply, economies naturally shrink in scale. Production moves closer to where people live. Exchange becomes simpler. Communities focus first on securing food, heat and shelter. In time, this creates space for a localist economy. It does not arise from political ideology. It emerges because local exchange becomes the only dependable system when the wider world becomes unstable.

Such an economy does not rely on debt. It relies on mutual support, direct production, personal trust and the use of simple local forms of money or barter that do not require constant expansion. It allows people to meet their needs without loading themselves with obligations that cannot be repaid in a contracting world. It replaces interest bearing debt with reciprocal arrangements and practical cooperation. It allows localities to adapt at their own pace rather than being dragged into crises created far away.

If Watkins is right, the monetary reset will not simply change how we think about finance. It will change the shape of society. The industrial economy will continue to shrink. The social economy will expand around it. And if I am right, a localist, no debt economy is not only possible. It is the natural outcome once the current debt based system reaches its limits.