Self liquidating loan example

which, as you have already guessed, does not ‘pay for itself’ and is used for consumption, not investment. All of these represent debt taken on today in order to purchase and consume something today, but the purchases do not then lead to new economic earnings. Since 2001, our national level of debt has very nearly doubled.An example would be borrowing ,000 to buy a car that does not help you earn any more money at work. If we take a strict view and exclude debt taken on for the purpose of speculating, say, in the housing market, almost all of this mountain of new debt has been of the non-self-liquidating variety.In the case of the auto purchase given above, k was borrowed and the car was purchased.But later on the loan has to be paid back, with interest, and every one of those future payments are made with cash that is not then available to spend on something else.The federal government always favors this last option because so very few people correctly perceive the (inevitable) resulting inflation for what it really is, a hidden tax that erodes the value of all existing money, whereas everybody understands that raising taxes directly takes their money away.Inflation is everywhere and always a monetary phenomenon.Cash that you can’t spend in the future represents consumption that you must forgo in the future.

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Excess printing by governments always leads to inflation.

Recently, many of our financial observers have been confused by the fact that the explosion in debt/credit, and therefore money, has resulted in asset, not commodity, inflation, but it is inflation nonetheless.

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