The borrowers in the money creation cycle

In the money creation cycle of lending, spending, earning, and saving the people who borrow money by taking out loans are very important; it is these peoples' promises to pay the money back in the future  that creates the value of the money that is created by the cycle.

 

To convince themselves to borrow money, the borrowers must believe that they will be able to pay the money back in the future; that is, the economic conditions of the future will enable them to earn the money necessary to pay back the loan.  This expectation is a commitment to economic growth, a commitment that is one of the main drivers of economic growth, and the consequences of that growth

 

Alternatively, the borrowers may believe that they will be able to sell whatever they bought with the loan before they have to completely pay it off, at a higher price to make an overall profit.  The expectation that values will increase is also a comminment that is one of the main drivers of growth.

 

This page is linked from:

The money creation process 

economic instability  

 

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