by Lindy Davies
The contention that “debt money” can only be paid back with money which has itself been loaned into existence, therefore creating an ever-expanding debt that can never be fully paid, is — despite its increasing popularity — fallacious. As Fred Foldvary explained (in GJ #122), the credit-worthiness of borrowers is carefully evaluated by lenders. Borrowers can pay back their loans either by producing more wealth than they have borrowed, or consuming less (or some combination of the two) — thus having enough left over to pay back the loan with interest. If every single borrower is capable of repaying his or her loan with interest, how then can the whole society be unable to repay its debts? Continue reading