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Why should debt support an economy? Without such massive inflation people wouldn’t need to take on much debt to make large purchases such as cars/houses because
by sbenitoj 8y ago
Why should debt support an economy? Without such massive inflation people wouldn’t need to take on much debt to make large purchases such as cars/houses because the prices of cars/houses would be much, much lower.
It only makes sense to take on debt if you have a productive way to put that money to use (Eg a business) that has a higher rate of return than the interest rate.
- zjaffee 8y agoDebt is the backbone of US GDP growth, money enters the economy as debt, is used to purchase something like a car or a house, subsequently it then reenters the banking system as the person who is being paid deposits their check, and then gets re-loaned out only to often immediately end back up in another domestic bank account that then loans out even more money. This cycle can continue forever, and the faster this cycle occurs the higher our GDP.