I find it odd that all these nations (including the United States) are getting themselves neck deep in debt and going broke... yet no one seems
to ask where all the money is going. We have this global financial meltdown on our hands, everyone is going bankrupt, but no one seems to realize
money doesn't just disappear... it doesn't vanish into thin air, it just changes hands. So I must ask myself where is it all going, who is getting
rich from the suffering of all our nations? Just where is it all going?
That is something which I posted in another thread not long ago... and it really got me thinking about where all the money may actually be going. Now
that I really think about it, the money isn't actually going anyway, it's being eaten away by debts which generate interest. Let me explain with a
Assume we only have two people in the world, whom I shall refer to as "Party A" and "Party B". Now assume there's a total of 100 dollars in the world,
and Party A holds 80 dollars, while Party B obviously holds 20 dollars.
Now lets say Party B feels the need to have more money, so he asks Party A for a loan. Party A agrees to loan Party B 20 dollars, but only if Party B
pays 5% interest on his debt each month. This means that Party B will need to pay back more than 20 dollars.
After paying back the debt, Party B will most likely be left with a very small amount of money, so Party B decides to loan another 20 dollars from
Party A. This time, Party B actually doesn't have enough money to keep paying interest on the loan.
However, in a miracle, Party C arrives, and he has the ability to create new money out of thin air! This shall surely solve all their problems,
shouldn't it? But there's a catch, Party C will only give new money to people if they agree to pay it back, with interest on top!
Facing bankruptcy, and having no other choice, Party B agrees to loan 20 dollars from Party C. Now we have a total of 120 dollars in circulation. The
main effect of this extra money, is that it causes all the existing money to be worth less.
So knowing this, Party A raises the interest rate on his loan to Party B (it was in the contract). Now Party B must pay 10% interest each month to
Party A. Having this extra money from Party C, Party B is able to pay off his debt to Party A quickly.
But now Party B is in debt to Party C, and after paying off his debt to Party A, he doesn't have much money left, certainly not enough to pay off his
debt to Party C. But now that Party B is so broke, Party A refuses to lend any more money to Party B.
And since Party C is the only one who can create more money, there's only one option left for Party B. So in an act of ludicrous desperation, Party B
lends even more money from Party C... so that he can pay back Party C.
edit on 19-5-2012 by ChaoticOrder because: I needed to clarify the example