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Doesn't the interest come from the extra value that was created in the economy from that debt?
by jryan49 8y ago
Doesn't the interest come from the extra value that was created in the economy from that debt?
- mathattack 8y agoInterest is determined by the risk inherent in the debt. Think of it in terms of consumer credit. Whether a bank or credit card company lends you money at 5% or 15% has more to do with how creditworthy you are, then with how good a use you will make of the money. (Think TVs on installment plans)
- dragonwriter 8y ago> Interest is determined by the risk inherent in the debt. That's the supply side consideration of the price of debt, but interest, like all prices, is determined by intersection of supply and demand, not supply alone. Demand side consideration is “what new income in the future does taking on this debt now enable?”
- mathattack 8y agoIt’s a zero sum game. Debt for one party becomes consumption and investment for another. The interest payments go from one to another.