alt Hacker NewsNo, interest is a typical zero-sum transaction where the borrower spends and the lender earns. The loan itself represents a temporary net increase in the money supply, appearing from nothing and then vanishing when it is paid back.
No, interest is a typical zero-sum transaction where the borrower spends and the lender earns. The loan itself represents a temporary net increase in the money supply, appearing from nothing and then vanishing when it is paid back.
I'm a bit unsure what happens when a borrower defaults on their loan. The money that was borrowed remains out in circulation, but what happens to the debt (anti-money)?
Does the bank itself use its own money to pay off the debt (deleting some of their own money), or do they simply delete the debt?