The Podium
 

 
Some critical theory, some public discourse, and some general nerdiness.
 
 
   
 
Thursday, October 13, 2005
 
The charging of interest for a bank loan is intended to prevent inflation by slowing down the process of two much money going after too few goods. However, since loans are given out due to fractional reserve credit rather than the money supply of deposits, this interest causes businesses to increase prices in an inflationary manner in order to pay back the loans. Businesses that fail to pay back loans go out of business and decrease the supply of goods in circulation, also causing inflation.

 

 
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