The economy as a game of Monopoly |
28 August 2019
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The economy is like a game of monopoly.
First everyone is doing great and capital is built in the form of housing and hotels.
At some point some people can't pay their bills any more.
To keep the game going, the winners can lend money to the losers.
But at some point the losers can't pay the interest any more.
So, to keep the game going, interest rates must go down.
So they can borrow more.
But at some point some people can't pay the interest again.
In a game of Monopoly we can start all over again.
In the real economy that's not really an option.
That would mean destroying the houses and closing the factories.
So the game must continue. And now you know where that ends.
It ends with negative interest rates.