>If it means the economy will grow slower, so be it.
This is easy for someone to say who already lives a comfortable life.
Credit is simply a more efficient use of wealth. Without credit, money stored is money that is unused, and thus money denied to everyone else. Everyone is poorer as a result because you have millions of people willing to exchange their goods and services but are blocked because they lack a medium of exchange that is being hoarded by the wealthy.
And with credit, money lent out is money that doesn't actually exist until made real by repayment which must come from extracting value from this planet at ever increasing unsustainable rates, and there's always the risk it won't ever be realized at all in case of defaults. Credit creates money out of nowhere, effectively imposing a tax on everyone and making them poorer so that banks can extract profits. The massive amounts of debt people go into effectively enslaves them forever. Nowhere is this clearer than the student loans scam which not only lures unsuspecting victims into signing up for hundreds of thousands of dollars in debt they might not ever be able to pay off but also drives up the price of tuition and lowers academic integrity precisely because it's trillions of easy government money being injected into the economy.
Efficient use of capital? That's exactly what the banks and investment firms said about stuff like highly leveraged derivatives and the CDOs and all the stuff that caused the 2008 crisis. Bad loans was literally the source of it all. We all know who paid the price for all that and who got to keep their fortunes.
Who said anything about stopping the economy? It will keep going just fine.
I am a third worlder, by the way. My father taught me not to be indebted to anyone, a principle he himself holds to this day and a major reason for whatever prosperity my family managed to achieve.
Do you think we can remove all debt without stopping the economy? That’s simply not how business works.
IOU’s are the oil that grease the economic machine.
Personal debt, when used wisely, can supercharge a life. Buying that first car, a house, going to uni. It can change the trajectory of the person for the better. Debt-fueled investments like startups and property improvements are another example.
How could it not grease the economy? It's literally money conjured up from thin air. Would be weird if it didn't.
It's an illusion. Until loans get repaid they're just inflating the money supply. Can't get a job after college in order to pay $200k in student loans? Lost the job? People literally end up homeless or worse.
That's like saying gambling on futures with 100x leverage can supercharge a life. Yeah, I'll get rich alright if the market moves favorably to my position. Alternatively I'll get liquidated and lose everything.
Debt is necessary to invest if you don’t have sufficient savings. To say that we can do away with debt is the opinion of someone who both:
- already has a good stash of resources, and
- is incapable of seeing the point of view of a poor person.
Also, all debt is very much not magic money. Most debt represents very real, hard value. Businesses routinely provide goods and services to each other with 90 or even 180 days to pay.
You’re confusing all debt with speculation and irresponsible borrowing.
If some Americans want to borrow $200k to study an arts degree, does that mean all debt is evil?
If somebody somewhere overeats, does this mean humanity should swear off calories?
> Debt is necessary to invest if you don’t have sufficient savings.
If you don't have savings, you accumulate. Much easier to do without a mountain of debt weighing you down. Seriously thought that was the accepted wisdom, especially if you're poor. Apparently not.
> Also, all debt is very much not magic money. Most debt represents very real, hard value. Businesses routinely provide goods and services to each other with 90 or even 180 days to pay.
And what happens when one of those persons or businesses goes bankrupt? All that very real, hard value just disappears. It goes away. Doesn't get paid. Defaults.
> You’re confusing all debt with speculation and irresponsible borrowing.
If you go into debt, you are speculating. That's a fact. You're betting that you're going to be able to pay later. Whoever is extending credit to you is taking a risk. Obviously that's a calculated gamble since any number of things could happen that make it impossible for you to pay. Absolutely no confusion here.
>And with credit, money lent out is money that doesn't actually exist until made real by repayment which must come from extracting value from this planet at ever increasing unsustainable rates.
You couldn't be more wrong here. Credit creates new money. The money doesn't get destroyed again until either the credit gets paid off or the lender defaults.
The Earth's resources don't magically spring into the air when someone takes a loan. If consumption is indeed unsustainable, it's because that's what people want. Industrialization is what's destroying the earth, people who lived in countries with bad economics like the Soviet Union wanted to industrialize just as much as capitalist nations, if not more so. They drained half the Aral Sea just to provide their textile factories with cotton. It just happened that they were so bad at industrializing that they polluted and consumed less. People caring about the environment is only possible in world with enough surplus to worry about it.
>Credit creates money out of nowhere, effectively imposing a tax on everyone and making them poorer so that banks can extract profits
Again, complete nonsense. Alice takes a loan for Bob to build a home. The value of the money created with the loan comes from the new home that Bob built. Banks aren't extracting profits from diluted money, they get paid for providing financial services. Sometimes, they offer financial services for bullshit, but just means that the government should implement better policy.
> You couldn't be more wrong here. Credit creates new money. The money doesn't get destroyed again until either the credit gets paid off or the lender defaults.
That is exactly what I said. This new money doesn't actually exist. It's backed by nothing until someone creates real value and repays the loan.
> The Earth's resources don't magically spring into the air when someone takes a loan.
Of course not. People work to extract as much value as possible. Exponential growth.
> If consumption is indeed unsustainable, it's because that's what people want.
Who doesn't want to grow expontentially? My whole point is it's not sustainable.
> Again, complete nonsense. Alice takes a loan for Bob to build a home. The value of the money created with the loan comes from the new home that Bob built. Banks aren't extracting profits from diluted money, they get paid for providing financial services.
Alice takes out a loan at the bank. Alice pays Bob for services. Bob deposits money at bank. That same money is loaned out again. Eventually it makes its way back to the bank again. And gets loaned out again. And on and on.
In this manner $100 easily turns into $1,000 or $10,000 or $100,000. Fake money that doesn't exist until all of those loans are repaid in full. And in order to repay, things need to happen, businesses need to be started, value needs to be created, money needs to be made, the economy must grow exponentially, and in doing so it creates even more loans which creates even more fake money driving even more growth. If the music ever stops for any reason, it's all over.
This is easy for someone to say who already lives a comfortable life.
Credit is simply a more efficient use of wealth. Without credit, money stored is money that is unused, and thus money denied to everyone else. Everyone is poorer as a result because you have millions of people willing to exchange their goods and services but are blocked because they lack a medium of exchange that is being hoarded by the wealthy.