Whatever is taxed from one section of the community servicing the debts is distributed among the bond-holders by way of repayment of loans and interest and quite often, the tax-payer and the bond-holder may be the same person.Īt the most, to the extent that the incomes of tax-payers (in a sense, debtors) are reduced, so will the incomes of creditors/ bond-holders increase, but the aggregate position of the community will, nevertheless, remain the same. There can, thus, be no direct money burden caused by internal debts since all payments cancel each other out in the aggregate community as a whole. In case of internal debt, however, since it is borrowed from individuals and institutions within the country repayment will constitute only a re-distribution of resources without causing any change in the total resources of the community.
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