This is a brilliant concept I picked up from a blog by Rachel Cruze.
When you think about it, finance or credit doesn’t actually create anything – all that it does is allow you to time travel into the future and ‘steal’ your future earnings…
When you take out a loan, all you create is a future liability to make payments. If you consolidate in a loan, nothing has changed except perhaps the interest payments.
If someone gave you a credit card with a million pound limit, you wouldn’t be any richer. You would just have the ability to time travel many many years into the future and take money from yourself then rather than now.
When you add interest on top, you can see that the time travel affect only increases. Further travel into the future is required to make more payments, to cover the interest, in order to get the ‘benefit’ of the money now.
There were some people who tried to game the system, thinking that a higher inflation rate may erode some of their debt and interest payments – coming up with complex calculations trying to justify things. However, even if it was at 0% interest, time travel isn’t something you would want to do.