MonteQuest wrote:My question no one answers is, if all money is debt, and debt defaults and repayments destroy the money created, what prevents the money supply from going to zero when all debt defaults and/or all debts are paid?
I used to ask myself that same question. Then I realized that the government, not unlike many businesses, borrows not just to cover long-term spending, but short-term as well. Because both business and government do this what you are asking has such a low probability of happening that you could say it won't.
I'm assuming when you say zero, btw, that you mean it would fall to the level of all cash.