Debt

Debt

Debt is that which is owed; usually referencing assets owed, but the term can cover other obligations. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned. Some companies and corporations use debt as a part of their overall corporate finance strategy.

A debt is created when a creditor agrees to lend a sum of assets to a debtor. In modern society, debt is usually granted with expected repayment; in many cases, plus interest. Historically, debt was responsible for the creation of indentured servants.

In modern economies money is created out of nothing by the banking system and so the question arises as to whether there is any justification for interest (as distinct from administration cost) certainly in the case of investment for capital projects. Binary economics queries the need for interest in such circumstances particularly as it leads to unnecessary increase in the levels of debt.