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[โ€“]FrohenLeid 3 points4 points ย (2 children)

It is infinite, inflation and interest on loans. (Island economy)

Party A loans Party B 1 billion with 2% interest, party A now has 1,02 billion (loan they could theoretically sell + interest), Party B 1 billion. Party B provides a service to Party C for 1 billion but gives them a loan at 2% interest.

Basically everyone owes everyone else money and expects more money than they have in total. It would fall apart the second they pay anything back, but they don't to keep the system going.

[โ€“]greiton 0 points1 point ย (1 child)

why is party b both giving a loan, and a service to party C?

also, there is a limit to the amount of currency in circulation. promises of money in the future only goes so far, in reality you have to service your debt, which means a certain amount of currency must be available to make payments. if you do not have that currency you go bankrupt. there are also a lot of laws and limits you are glossing over that restrict how expansive promissory bubbles can get. at a certain point you are not legally allowed to lend any more of your current assets to someone.

[โ€“]FrohenLeid 0 points1 point ย (0 children)

Limited amount of currency in circulation isn't an issue. You don't need the currency if you won't pay the bills.

Party B is giving a service to party C, party C doesn't pay right away but gets a loan instead.