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I don't see why. Every debt is to another person a claim. As debt is reduced the claimant receives his cash back, and he certainly need not lend it to someone else. It can just as well be invested as equity, and the result is a society with less gearing.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Dec 14th, 2011 at 10:41:53 AM EST
[ Parent ]
Cash is a part of the consolidated government debt.

Or, to put it in another way: Government bonds are a part of the money supply.

With a properly run central bank, cash and government bonds held by own residents contribute precisely equally to society's gearing: Not at all. (Foreign government bonds are different.)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Dec 14th, 2011 at 11:26:17 AM EST
[ Parent ]
But in the Eurozone things don't work that way, at least legally...

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Wed Dec 14th, 2011 at 11:45:57 AM EST
[ Parent ]

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