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Are interest rates the cause of economic growth?
For example there is no money in the system and bank a is lending company A a loan Y with X interest.
how can company A pay back the loan Y with interest X when the system is just loaded with loan Y?
My conclusion is the Loan Y can only be paid back with interest when the economic is growing by other loans?
Let's consider a simpler example.
You have 10 apples. With that, you can eat $x$ apples and "invest" in the rest $10-x$ apples, plant them, and each would yield two apples tomorrow. Let's say that with some optimization, you decided to eat 4 apples, saving the other 6 apples so that you could have 12 apples tomorrow. GDP would grow by 2.
Is this a result of "interest rate"? No. There's not even a bank here.
Now imagine that there is a bank that ask you to deposit your apples there for a day. What would you demand in return? 2 apples tomorrow for every apple you save today. That's the interest rate. The assumption is that the borrower can do something at least as productive with the money he/she borrowed, and the apples would go to those who can most efficiently use them.
I would like to say the pay back of interest rates in a debt monetary system can only be served with new debts?
Initial state: no money in the system First step: Bank A is lending the first loan X with interest rates I to company A. Second step company A is buying productions from Company B at the amount of X. Third step company B is buy products from company A. Forth step: Company A is paying back Loan X but it can’t pay interest rates I because in the System was just amount X.
Where does Company A get the interest I. In my opinion only through new debts?
