Interest on Loan

Interest on Loan

Previously in this blog, I wrote about how money is created, the blog is titled 'Creation of Money', please look for it.  Today, I'd like to elaborate on this topic by writing about 'interest'. 

Just a quick re-cap; in our current financial system, money is created by debt, by the banks.  The money which was created, did not exist before, every time the bank makes a loan, they create money.  

These loans must be returned/repaid to the banks, plus, the interest.

The 'interest', which is charged at the creation of money, is a problem, since money is created from 'nothing', which would mean, more money will need to be earned by the borrower, to pay the interest.  

But, a 'big' but here, mathematically it is impossible to pay the loan back, plus interest, as  there is not enough money to go around to pay the 'interest' on all the loans outstanding.  

Can you see this?

Did I explain this concept properly?

Most borrowers, can manage to pay back their loans in total; which would be the loan amount, plus the interest.  However, not all borrowers will be able to pay off the loan and interest.  

In order for most borrowers to be able to pay back the loans from the bank, some will eventually seek 'bankruptcy protection', since there is not enough money to pay for the 'interest'.  

Once 'Bankruptcy' is in the picture, the banks will get back most of all of the assets of the borrowers.   

This really is how money is created, it is loaned out to existence.   

Thank you for returning back to this blog,

Ben