Loans are nowadays an integral part of society; citizens take loans to finance the purchase of vehicles, houses, or for other types of personal spending. Others take loans to finance businesses. Loans therefore seem to be the help one needs to have a steady mean of transportation at their disposal, to own a roof to shelter oneself and one’s family permanently, to finance a business and have a source of income. If that is their effect on individuals, what is their effect on society as a whole?

Personal spending type of loans create demand for products and services in society, thus raising consumer competition for products and services, and since sellers would have more potential buyers, they would increase the price. The conclusion of this is that by giving out loans for personal spending, banks increase the price of products and services in society, and thus devalue the monetary unit. Individuals seem to profit from these loans, whereas people as a whole suffer from the devaluing of money. By such, an x amount of money once able to purchase a certain product becomes unable. The process of giving out personal spending loans is therefore ironically a process for disabling money.

Businesses financing type of loans on the other hand are really on the other hand. They create supply of products and services in society, thus raising suppliers competition: Since buyers would have more potential sellers, sellers would lower prices in order to compete for buyers. This type of loan therefore, in contrast with the former, lowers the price of products and services in society, and thus raises the value of the monetary unit. Therefore, unlike the previous scenario, society as a whole benefits from this type of loans.

Leave a Reply

Your email address will not be published. Required fields are marked *