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But everybody also knew everyone else was broke, so they had mentally discounted the future value of their accounts receivable (though obviously not to the poin
by jameshart 6y ago
But everybody also knew everyone else was broke, so they had mentally discounted the future value of their accounts receivable (though obviously not to the point of actually writing it off yet). So their subjective sense of their future worth was negative, until the stranger showed up and injected liquidity into the market.
- brianpan 6y agoShouldn't their future worth still be zero? Everyone has $100 owed to them (which is never coming) and $100 that they owe (which they aren't paying).
- jameshart 6y ago"Alice is never gonna pay me, which means I'm gonna have to go to Bob and tell him I can't pay him back, and he'll tell everyone in town and I'll never get credit again" - a future situation with negative value. Vs. "I may be out of cash, but at least I'm debt free. I wonder if Carol will lend me $10?" - a future situation with zero - or maybe even positive value?
- 91aintprime 6y agoI appreciate you asking this question, as it wasn't obvious to me either