The problem with this analogy is that the world of finance does not map directly to physical goods or how a person would handle a real world asset they own (as

The problem with this analogy is that the world of finance does not map directly to physical goods or how a person would handle a real world asset they own (as opposed to abusing other people's assets). Let walk through the first couple of sentences: >> "John Paulson borrows one cow so he can sell it for $100. He gives you $10 as collateral." No one in their right mind lets someone walk away with a $100 cow for a $10 deposit. If you are a car rental company, you don't force the borrower to deposit the full price of the car, but you make up for this risk in volume across many car deposits and you have insurance and the backup of public crime fighting organizations. If you have a single page contract for "you borrow my cow and give it back later, here's a $10 deposit" you have none of this. Second is the use of the term "borrow". If I loan you a cow and you return a different cow, this may not be acceptable to the lender. This is not "borrowing". >> "You buy your neighbors cow for $100, which you finance by taking out a $90 loan from the bank and use John's $10 to make up the rest." ok, full stop!!! No bank operating correctly will give you a loan against a cow that you have already loaned to someone else. This is the root of why people use the term "ponzi scam" in reference to such transactions. >> "You brag to everyone about your financial health. You have assets--two cows you own, plus one Paulson owes you--worth $300, and liabilities of just $100." Sorry, there are still only two cows in this story. This is not software where you can magically copy a cow. And so goes the problems with analogies like this. Don't get me wrong. The blog author writes it well and gives a peak at the absurdity of the financial system. Unfortunately, the financial system is so absurd that there are no useful metaphor against real world goods.