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by imtringued
1042 days ago
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You are absolutely correct but you are forgetting one thing. The entire system ratchets itself back to a zero money supply automatically as debts are repaid. This means the money supply shrinks overall if the interest rate is sufficiently high and the rate of repayment exceeds the rate of new loans being taken on. This is a very slow acting way of doing things and it can lead to debt deflation. If there was a way to avoid debt deflation, then total debt wouldn't have to rise permanently. |
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