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**Fainnamoony** · 10-28-2011, 05:03 AM

Here's the key here: Without interest, debt is repayable. However, in reality, each of those people would owe the person the $100 plus interest.

Here's the second key: The $100 can only be obtained by new debt. Cash is only 3% of all money, so the rich guy couldn't have physically put down more than $3.

So with these two conditions, you've got the endless loop: each month, each person owes the next person more. And the only way the whole thing can stay afloat is if they find a new guy to go into debt to cover servicing the debt. So we have the need for exponentially increasing debt to keep it going, and if that doesn't happen everyone in the town loses their collateral (their stuff) to creditors....which are the banks. But the banks will collapse too because they can't sell their assets. So that means the lender of last resort, the FED, will end up owning everything in the entire town.

10-28-2011, 05:03 AM	#15
Fainnamoony Join Date Oct 2005 Posts 513 Senior Member	Here's the key here: Without interest, debt is repayable. However, in reality, each of those people would owe the person the $100 plus interest. Here's the second key: The $100 can only be obtained by new debt. Cash is only 3% of all money, so the rich guy couldn't have physically put down more than $3. So with these two conditions, you've got the endless loop: each month, each person owes the next person more. And the only way the whole thing can stay afloat is if they find a new guy to go into debt to cover servicing the debt. So we have the need for exponentially increasing debt to keep it going, and if that doesn't happen everyone in the town loses their collateral (their stuff) to creditors....which are the banks. But the banks will collapse too because they can't sell their assets. So that means the lender of last resort, the FED, will end up owning everything in the entire town.
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