This is my follow up to "just a question".?

Question

I got a pretty good answer for my first question. But the next part is even more confusing for me. If the money is borrowed from the banks, this obviously creates debt. But if the banks are the only place you can get the money, how is it possible to repay these debts?

Answer 1

I'm not sure what was your previous question. But assuming investors are rational, they borrow money apparently for some good reason -- to earn higher returns. Hence, when the loan is due, investors will liquidate their investment (it could be for business operations, or re-investment in the financial market) and repay back the loan + interest. The residuals are apparently the profit which firms make. Hope that answers your question.