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Suppose there are three major agents in the economy: A, B, and C.
A owes $10 more than B B owes $10 more than C A owes $500,000,005 to B A owes $500,000,005 to C B owes $500,000,000 to A B owes $500,000,000 to C C owes $499,999,995 to A C owes $499,999,995 to B How much money should be exchanged to pay off debts? The fact is, the problem would be solved if A paid C $20. In an irrational economy, A, B, and C, would borrow from the central bank about as much as what they owe. Their debts would escalate and perpetuate, while their economy would tank, and inflation would soar. That's what our economy is - irrational. |
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