So, forgive the ingenuity, what prevents me from taking that 1000 loan, park it in my bank account, and repay the 990 due in a year (earning 10 in the process)?
.... so you can... never borrow more than you already have? that seems like the exact opposite of a loan. Why not just keep the $1000 yourself and spend $800 of it? If you can't pay yourself back, then you're only out $800 instead of the $1000 in your example.
If you loan me 10k, and then later forgive the loan, you are still 10k in the hole. I spent the 10k on goods and services, and you have 10k less that you can spend.
Yeah, if I could borrow $250k+ at the start of my career knowing that I'll never have to repay a penny of it, and the only consequence is that I couldn't get a mortgage in the first two years out of university...
...why wouldn't I just borrow every cent I can without even intending to pay it back?
If you paid your loans off, you don't lose anything by someone else getting $10,000. That is, indeed, incontrovertible. Imagine I have an apple and you have an apple. If I get another apple, that doesn't mean you now have zero.
So the idea is the bank gave you a loan then forgave it, so it’s now income? That’s a big leap in logic and sounds evil considering you never consider that when getting a loan, you only expect the internet to accrue.
I borrow $1000 and promise to pay back $1050. Lender now has a $1050 IOU which he will likely put into circulation (borrow against it, trade it etc.). Monetary supply just increased by $50.
Someone with no/low income will take eons to repay $1.685.000, even if made in installments. I doubt it would even be a serious option unless you were wealthy.
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