Comment by ta12653421
1 year ago
Not correct:
Your loan is loan+interest; when your loan is created, we do not create the interest-part on it - the interest-part is the rest that you have to pull from someone else, since bank gives you loan X - but asks loan X + interest Y back from you -> thats the reason why there needs to be another fool somewhere else who is then again taking a loan.
its one of the main architectural choices of our money architecture :-D
Only the loan principal is destroyed when it's paid back. The interest goes to the bank, which then gets to spend it or distribute it to shareholders who then get to spend it etc.
Suppose a mechanic takes out a mortgage to buy a house. The bank uses the interest on the loan to pay part of the bank manager's salary. Then the bank manager pays the mechanic to fix his car. Nobody inherently has to take out another loan for the borrower to pay back the bank.
The main reason debt keeps going up is that housing prices keep getting less and less affordable, requiring people to take on more and more debt to buy a house or pay rent.