Perpetual Money Growth To Pay Interest

Perpetual Money Growth To Pay Interest

Introduction

A Popular Economic Hypothesis says:

Because money lenders charge interest on money loans they make, thereby requiring more money in repayment than they lend, the quantity of money in the entire system must expand perpetually.

On a system wide basis, the idea of money growth to pay interest resembles the compound interest model. With more money pumped into the system to pay interest, money growth cannot cease without massive defaults.

Interest Added to Principal

In a cycle that includes lenders, borrowers, and the customers of borrowers (who also must borrow their funds), interest gets added to principal.

Adding interest to principal increases the amount of the principal. Increasing principal creates a continuous cycle that leads to the need for more and more money, ad infinitum.

More money Ad Infinitum

According this idea money grows as follows:

Thus, money must expand just to keep the system going.

Intuitively this idea may seem credible…

But, does the hypothesis of perpetual money growth pass the test of logic?