Apple, Oranges, and Debt

I’m going to make a short, simple example of how debt based money inevitably bankrupts the economy.

The whole economy is you, me, and the bank. I sell apples and you sell oranges. The only way to get money into the economy is to borrow it from the bank, and in this example if you borrow one dollar, you have to pay back two (keeps math simple, but a different interest rate only changes the rapidity of the outcome).

You want an apple, so you borrow a dollar from the bank and buy one. Now you owe the bank two dollars, but that’s easy, you just sell me two oranges. I give you back the dollar and borrow another from the bank. You pay the bank back, but I have to sell you two apples to pay back my loan. Now you owe the bank four dollars. See where this is going?

Eventually we owe the bank more money than we have apples and oranges to sell. We default on our loans, and the bank takes all the apples and oranges as collateral. We have nothing and the bank got everything. That was the plan of the bank at the start.

About American Socialist

History major turned engineer
This entry was posted in Opinion and tagged , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s