Healthy Money Healthy Planet - library.uniteddiversity.coop

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The ‘extra‘ money to pay the interest on loans is generated through
successful business ventures.
This is a common belief, particularly held by people who never think about the
design of money or the total money supply. Most people believe that there must
be ‘growth’ to earn money to repay loans. This is the same as saying that we get
money from economic activity, and that some of this money can be used to
repay loans. This is not true. No economic activity has ever created any money.
The extra money in the system is actually the extra debt incurred when stressed
borrowers are forced into further debt.
If you re­read Chapter 1, you will remember that out of the ten families in the
hypothetical example used, two could not find enough money to pay back their
loans with interest. The money was just not in the system.
Interest is necessary to dampen inflation.
Inflation is actually inherent in the current system, and so it is better not to have
an inflationary money system in the first place. A major reason that inflation is
inherent in the system is that interest is charged on loans. Why else would the
price of houses and bare land have been taken out of the Consumer Price Index
if it weren’t to mask inflation? Even without land inflation being accounted for,
interest is inflationary. Almost all money originally came into being when
someone went into debt to a bank. Each retailer or wholesaler has to use this
money, so retailers, professionals and manufacturers build interest into the
prices of their goods. For instance, the fact that your dentist has to service his or
her student loan means that the price of dental treatments increases. The