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It's not that clever, they might be out of debt but they are also out of creditors. Nobody got richer or poorer just balances were settled. That's kind of the

• paulddraper 8y ago
  Exactly. > However, the whole town is now without debt And without credit. I next expect to hear a ingenious story about someone who pays off a car loan in a way that results in an empty bank account.
• Gustomaximus 8y ago
  > they might be out of debt but they are also out of creditors Or now have access to credit again. Given they were each other's creditors they may not have been willing to extend credit past $100. Now being paid they are likely to offer that same credit again as Thier confidence of being repaid is stenghened. So this example also shows the requirement for confidence in markets whether the fundamentals support it or not. If one link refused credit it could snowball through the town grinding the flow to a halt. And to take this full circle, this keeping confidence and flow was the QE program.