Why Debt Must Continually Grow

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Sun, 2010-10-31 03:28

donOld

The Profit and Interest Gap (the PIG)

When a loan is created, only the principal is created, not the interest. Money to pay the interest must be taken from money already circulating in the marketplace.

Likewise, when a good or service is produced, only the producer's costs are paid out to the marketplace. Money to pay the profit must be taken from money already circulating in the marketplace.

If all sellers are demanding more money from the marketplace than they are contributing to it, new debt is essential (if all goods and services are to be sold).

Sun, 2010-10-31 05:48

siamdave

I'm with you on the interest, at least part way - nobody should be allowed to charge interest on money they create out of thin air - but I don't quite follow the profit bit. You seem to be suggesting that, for instance, every small businessman or artisan should work for free?? The carpenter, for instance, pays $100 for wood, and $10 for screws and stuff, and $10 for electricity for his power tools - total expenses $120 - and so he should sell the cabinet for $120, and the 5 hours labor he has put into building this cabinet is no charge? What's he going to live on? Why would anybody do business if they could not make a profit?

Sun, 2010-10-31 14:38

donOld

siamdave wrote:

You seem to be suggesting that, for instance, every small businessman or artisan should work for free??

Not at all. On the line "Components of Cost" you see labor which includes all internal labor paid to workers, managers, etc. In the case of small business, where the owner/artisan is the only worker, of course his or her productive labor would and should be included in price. The profit that I am referring to here is the additional amount that is added to price solely to reward shareholders, speculators, etc, who contribute none of their own labor to the production. Their demand for a "return on investment" is no different than a demand for interest on money created "out of thin air". Both necessitate new debt each time the total volume demanded increases.