Quote:
Originally Posted by swoop101
If all countries balanced the books by cancelling equivalent debts then interest would not need to be paid and all would be well.
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Unfortunately, our current financial system allows a bank to claim the money it is owed as a form of asset, as it is (in theory) a guaranteed income stream from interest and capital repayments. In 2008, it was the realisation that a massive pile of sub-prime mortgages were in circulation, which would never at any point in the future be repaid, that precipitated the financial collapse. Note that it was the dawning realisation that future interest payments would not be made, and not a sudden, actual failure of large numbers of people to pay, that was the trigger.
If equivalent debt is cancelled, then those "assets" (the bank's claimed future income stream from interest payments) disappear in a puff of logic. Crucially, if the capital is paid down, then the interest payments are lost and a truly massive chunk of what the banks claim is their value just disappears at a keystroke.