Here is a question for the genii of the thread. In order to solve problems like this, it is instructive to reduce the size of field to a few individuals to reduce the complexity. A person loans another in a ten person world, let's say, a sum of money, 100 shekels. The interest charged on that money is 3% on the unpaid balance. The premium is paid over ten years at 10 shekels per year. The debtor works for a company where 3 other persons work at a hagorah factory in this world. He makes 15 shekels per year, as does each other person in the company. They make and sell hagorah to the other five persons who work for themselves making simple mishti and farming bokroc the staple diet. The other two persons in the society are a banker and a king. Each person in turn is loaned the same sum of 100 shekels to build his mukruk where he habits. In the first year, the people who have borrowed the money at the bank pay a total of 0.03 X 100 X 4 = 12 shekels in interest plus the 100 shekels they all collectively borrowed that is scheduled for payback, of premium. In the second year they all pay back 10.8 shekels. In the third 9.6 and so on. They pay back in addition to what they borrowed, an additional 66 shekels in ten years. Now since all the money in this kingdom created for these 4 person was 400 shekels, where does the 66 shekels come from? You might think this is a silly question, but in fact it is a classical question in economics, and the illustration has been used to show that compound interest is in fact immoral or usury. Others have argued that over time, business and society grows and new loans are made create the money that somehow must accrue to the borrower. Others point to the extra 5 shekels per year the persons make, all told 200 in ten years for 4 persons, and say it must circulate to create other moneys. The King who collects a shekel per person in tax, and gets free mukruk, and is supplied mishti, hagorah and bokroc, at the end of 10 years has the most money at 90 shekels. The Banker with 66 extra shekels of interest the next most money and the people of course have nothing at all, having paid back their loans, and spent the meagre 4 shekels per year on mishti, hagorah and bokroc. If the king added a 10% vat tax ostensibly to feed the poor mishti makers, it is easy to see the people could only spend 3.64 shekels, as the money is not created to pay that tax either, so the mishti makers and farmers make even less. You can add all kinds of money channels, sources and sinks to this oversimplified model but it does not change the fact that the money is never finds its way by any demonstrable way into the hands of the person who borrows it to pay back the interest. It has no channel of return to the borrower.
But the interest money the banker gets must all come back the borrowers in order to repay the loan. If he keeps it to pay the interest, he cannot use the money to live. Obviously our kingdom must be more complex than this. If the other 6 habitants use money, then they must make and borrow it too, presumably to sell implements and food to the other habitants, and the banker. Incredibly no one has every modeled a society of any complexity on a computer to show if the interest money does in fact come up short or cause other evils. It would seem however that society in general must owe far more money than is created within the society to pay back what it borrows. Is there any way to overcome this? Is it provable that the money finds its way into the hands of the borrower naturally within a society? I don't think it is enough just to wave one's arms and say its all works out, etc.. I don't believe it is an answered question and the root of it must cause the boom and bust cycles we experience in modern fiat money economies. Another more important question is how does one overcome it? Barter is obviously unwieldy, and without money society would find it hard to function as large and complex as it is. Wage and price controls, to hold down the constant demand for money demands has been used successfully since ancient times but are obviously also iniquitous and inequitable. A short term fix.
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