GhostOnTheHalfShell on Nostr: But the borrower is on the spot for more than the principal, paying off the loan does ...

But the borrower is on the spot for more than the principal, paying off the loan does not zero out. They have to pay interest. The money comes from someplace else.

More bank loans or from fiat money (ie US “debt” and yearly deficit). The bulk of the money supply is bank credit money. When lending backs off, the money supply shrinks, amplified by interest obligation.

the quantum of money, that bubble of means of exchange collapses, not to zero but a negative.