I just genuinely don’t understand how it works, like couldn’t you realistically just creat more money. Isn’t it just like a number in a bank account? Am I really dumb?
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So if you read the papers, most entire countries are in massive debt. Most corporations have debts. Most people have debt. Who are they all in debt to? Like where is the one rich guy who handed out all the money to begin with?
Aaaand the secret is that loan origination is a big source of how we create more money. Basically you take a $300k loan out on a house and the bank only had to have a small amount of that money on deposit to lend it to you. The rest was just simply created, and you’re expected to pay it back with interest (which wasn’t created).
The result is you get inflationary spikes as more debt is created and deflationary ones as its paid back. Its why the fed can raise interest rates and that stops inflation. Fewer loans (due to higher interest rates) means less and less money in the system.
It’s unintuitive but without more debt the cash in the system would dry up.
I always wonder how a government can be in debt as well. Can’t you just say „ok soft reset, we are no longer in debt“
This depends on what you mean when you say how can we be in debt? Are you asking if the person who issued the debt could forgive it, discharge it. Or do you mean if someone creates $1, the only dollar in existence and says you can borrow it but you owe $1 and interest. The debt can never be repaid.
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