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Business owners have been led to believe debt, if not an unmitigated good is at least a necessary evil. This evaluation as qualified as it is, is wrong. Debt has no redeeming qualities. The only reason debt is tolerated is because in a system where options are limited there are no other options available to us but debt or failure.

Even considering the best case scenario, where money is paid back from income earned by an investment made with borrowed money the benefits are just not sufficient.

Lets assume that Tom purchases a snow plow. He expects to earn sufficient money from plowing snow to pay for the plow. This works out for Tom but puts upwards pressure on the price of plows and money and downward pressure on the price charged for snowplowing. This is in accordance to the rules of Supply and Demand.

The more of one thing purchased the higher the value of the item and the more of a thing that is sold or made available for sale the lower the value of the individual item or service.

The negative impact of the liability is offset by the value of the snowplow - at least in the short term, so long as too many people do not buy snowplows and so long as the Demand for snowplowing remains sufficient to occupy all those who are snowplowing.

In the long term the plow must be paid off and this includes interest and maintainence and repairs as well as operating costs before the plow must be replaced. But lets assume that Tom's plans work out. His business is a success and he is able to pay off the plow and save up money for a new plow. The debt benefitted Tom but this in itself is part of the problem because if debt did not benefit the borrower no one would borrow and the world would be far more prosperous.

In effect, the success of Tom encourages others to borrow and over time this may be for less and less practical reasons.

A plow is an asset with real benefits but a debt is a liability or a claim on future wealth. Debt increases the pressure on deposits and increases the need for lenders. The more people borrow the more likely interest rates will increase and the more Banks and other lending institutions will prosper at the expense of manufacturing facilities.

In short the more people make money on lending money the more money becomes an asset to be used as an asset to be invested in loans. The more the financial sector grows and since there are finite resources the more resources put into the financial sector the less available for the productive sector.

The profitability of the finanical sector increases the Demand for those who are versed in creating money from money. This pushes up wages in this sector as compared to others. There will be a drain of resources including human resources from the manufacturing and productive sectors into the financial sector.

In other words there is a cost to borrowing money beyond the obvious direct costs represented by debt and interest payments. There is a systems cost. Ultimately, when we look at the big picture, debt is only justified in a system that provies for no other alternative.

Exchange are advisory panels on carbon costs who advise on reducing carbon costs in a single business or several interlinked businesses or a particular geographical location.

The Rational School suggests the creation of a carbon backed currency called a rollar or rational dollar will help solve the debt problem.


 carbon backed currency




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