Junk Money Party will go on for 3 years - page 3.

wareen

legendary

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Revolutionizing Brokerage of Personal Data

Quote from: johnyj on December 22, 2011, 04:06:01 AM

For example, on an island with only 2 people and one central bank, the central bank loan out 1 billion euro to A and 1 billion euro to B, both A and B will have some cash to spend, and when the loan matures, they both need to payback 1 billion euro. But the total amount of euro on the island is only 2 billion euro, no matter what they do with their money, they can't payback the loan with extra interest, the interest must come from some where else...

A and B could help to clean the floors in the bank and get paid (with money from their earlier loan repayments). A and B can therefore use this newly earned money to pay the interest.

I'm not saying that the current monetary system is sound, but those "2 people on an island" examples are a bit oversimplified IMHO.

ThomasV

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Quote from: johnyj on December 22, 2011, 04:06:01 AM

the interest must come from some where else...

not true. the interest comes from other loans made in the meantime.
central banks never stop loaning money

johnyj

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Activity: 1988

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Beyond Imagination

As that article about FED pointed out, although central banks can print as much money as they will, it will only come out in loan's form, either a loan for the bank, or a loan for the government. And a loan means that you have to payback it some time, this is still something confusing

For example, on an island with only 2 people and one central bank, the central bank loan out 1 billion euro to A and 1 billion euro to B, both A and B will have some cash to spend, and when the loan matures, they both need to payback 1 billion euro. But the total amount of euro on the island is only 2 billion euro, no matter what they do with their money, they can't payback the loan with extra interest, the interest must come from some where else...

grondilu

legendary

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So true.

anu

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RepuX - Enterprise Blockchain Protocol

Mario Draghi (new #1 of the ECB) just handed the European banks an unlimited credit line for the next 3 years. This means that the party will go on for another 3 years or so and that the hangover will be much worse.

Incidentally, 3 years has been the amount of time the government needed to prepare for currency reform here in Germany in the past (introduction of the Deutschmark from 1945-1948 and introduction of the Euro 10 years ago).

Looks like the timing of Bitcoin is perfect. Another 3 years for ppl to realize that the time of fiat money is over before getting bitten once more.

http://www.taiwannews.com.tw/etn/news_content.php?id=1792434
http://www.spiegel.de/wirtschaft/unternehmen/0,1518,804969,00.html

Topic: Junk Money Party will go on for 3 years - page 3. (Read 6001 times)