4 ms·
this is probably trivial economics but it always eluded me: when the govt is giving out amount X money, and wants amount X + INTERESTX back. how can that work?
by monos 17y ago
this is probably trivial economics but it always eluded me:
when the govt is giving out amount X money, and wants amount X + INTERESTX back. how can that work? where should INTERESTX come from when they only gave us X?
- vitaminj 17y agoNon-government deposit banks are legally allowed to create money (up to some reserve ratio).
- vetinari 17y agoTime. The govt gives out X/year, not the final amount X. When they want it back, it comes from different 'tranches'. This ensures, that there is always debt. Money has value only if there is debt and you must use some to get out of it. Why would you need it otherwise?
- eru 17y agoAnd the Fed gives its `profits' back to the government to spend. The ECB does the same (perhaps more roundabout).