How the Feedback Loop Works. The loop starts with the combination of a cheap-to-exploit energy resource, technology that would use this resource, and debt that allows those would like to gain access to the resources to have the benefit of them, before they are actually able to pay cash for them.

This combination allows goods to be produced which initially may not be very cheap. Over time, new methods are tried, allowing technology to improve. Consumers are able to buy increasing amounts of goods and services, both because of their own increased productivity (enabled by fossil fuels and new technology) tends to raise their wages, and because the improving technology lowers the cost of goods. Government services are expanded as tax revenue per capita increases. Infrastructure such as roads are expanded making the economy more efficient.

In this context, profits of companies grow, allowing reinvestment. Investment is also enabled by increasing debt. This allows the cycle to start over again, with better technology and more infrastructure in place. The economy tends to grow, and the standard of living tends to rise.

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Thing that most people fail to grasp is tight connection between bank/finance system and resources/energy. As all of us lived only during time of constant growth we fail to understand that things can be different and that whole finance system main function was to catch and allow this expansion to continue. As real first problems in energy and resources growth become real instantly it hit finance system, and 2008 event were used to switch gears from the bank induced debt to the direct governments financing of basic industries.