| > why would anyone make a loan if they didn't stand to gain anything? Exactly. That's precisely the question. If you lend money 1) you bear the risk of not seeing you're money back 2) you're not able to spend that money during the loan period. Even if you don't care about risk and don't want to spend that money 3) you'd still be greedy enough to want something back, right? So let's imagine all 3 points disappear: 1) There is practically no default risk.
2) You could still purchase something by exchanging your credit with goods (and everybody would accept for its nominal value without any discount).
3) This credit certificate you hold in your hands turns out to be very convenient to use. It's so much easier to trade and everybody accepts it and trusts it, why not to use this as "money"? And why to ask something back when it's already providing me more utility then "money" with no disadvantages? So in reality you have a lot of "loans" that end up being called quasi-money exactly for the reasons above. Some countries issue government-bonds with negative interest rates, not only because they are considered very safe investments but also because banks use those type of bonds for their operations making them convenient to hold. Like I've said, it's a quantitative difference not a qualitative one. Money = loan with negative interest rate. |