The big difference is that when a bank loans money to a business, the business can bring in revenue from other parts of the economy to enable it to pay that loan back.
When the Fed loans money into the US economy, there is no place to pull money from to pay the loan interest; only the principle can be repaid. The loans can only be repaid with hard assets (gold, real estate, etc) or by inflating the currency sufficiently to devalue the principle that was borrowed to below the repayment cost.
> The big difference is that when a bank loans money to a business, the business can bring in revenue from other parts of the economy to enable it to pay that loan back.
That's not a difference. When a biz spends borrowed money, it does so with the expectation that money will come back, just as the bank expects that its loan (of deposit money) will be repaid. In both cases, the bank/biz sent borrowed money out the door and only has an expectation that sufficient money will come back. (Yes, deposits are borrowed money.)
The Fed is different because it gets to print money. We're talking about ordinary banks here.
Yes, banks can get into trouble if its lenders call at an inconvenient time, but so can biz.
When the Fed loans money into the US economy, there is no place to pull money from to pay the loan interest; only the principle can be repaid. The loans can only be repaid with hard assets (gold, real estate, etc) or by inflating the currency sufficiently to devalue the principle that was borrowed to below the repayment cost.