At the same time you friend Tom opened a lemonade stand. He sells cookies with lemonade and this combo sells especially well. He wants to borrow cookies from you, promising he will sell a lot of stuff an then will buy and return more cookies than he borrowed to you (interest).
You see that lemonade stand does very well and you want to do it yourself. But unfortunately your mom forbids you to do so. So you do next best thing: you give Tom all of your cookies, and then some more that you - in turn - borrowed from mom and other friends, hoping that Tom will turn them around and return even more cookies to you.
For example if Tom's stall does not work well, then the "cookie crumbles". Your mom, of course, being your mom will still give you cookies, no matter you did not make wise decisions earlier and you will still hold on to your incumbent position as a cookie distributor even though you don't deserve it anymore.
This goes on for a while, till people don't want your mom's cookies anymore because, all their moms have also started distributing cookies generously.
Then a new kid comes to your neighbourhood with an exciting new flavor of cookies and suddenly it seems cool to be having those cookies. Your mom, obviously does not like it and tries to out-law or regulate those cookies. But then, the train has already left the station.
That couldn't happen while your are living at your mom's house.
Just remember that your mom doesn't accept any other kind of cookies for paying taxes. OK.. maybe we stretched the metaphor a little too much there.
Just for the record. At the end of the day, your mother is the only able to do cookies and she is not limited in the ingredients. Your friends should remember that she could not be willing to do more but that doesn't mean that she can't.
If you want very condensed crash course in investing, economics, corporate finance etc., I can recommend CFA exam preparation materials. You do not need to take exam to get them, there are plenty of used books available for sale, and you can get them on the cheap as you are not worried about them being up-to-date
[1] https://www.youtube.com/watch?v=I_x626joik0 https://www.youtube.com/watch?v=l_IgcmsqnVM https://www.youtube.com/watch?v=rxZhtGeRa-M
The money you spend servicing debt is the money somebody else earns on their savings. And many people (retirees are an extreme example) happily spend such money on restaurant dinners and new cars.
http://www.bankofengland.co.uk/publications/Documents/quarte...
According to your claim, debt interest just disappears while i know for a fact that it does not since i've used such money myself (earned on my savings) in the past to buy stuff.
If you look at page 3 of the document, it talks about how repayments are basically an accounting alteration of the debtors deposit account.
Meaning that said account is reduced by the mount paid, but does not show up with a matching increase on any other account ledger (the banks own or any other).
Debt and savings are wholly uncoupled, no matter what mainstream economics likes to think.
Negative corporate bond inventories happened because new rules make it very burdensome for banks to hold corporate bonds because of reserve capital requirements. So bank sell their inventories and because there are many non-banking financial institutions that seem to have an appetite for corporate bonds, banks sell even more bonds than they have (being "short").
For the same reason synthetic credit is popular. Instead if holding an asset (corporate bond in this case) you recreate synthetic position with derivatives. For example, if you buy a right to buy a bond at a certain price and at the same time sell a right to sell a bond at the same price, it is essentially the same as if you bought a bond (bond forward strictly speaking, but we will omit the difference here).