[PEN-L:387] Re: Re: Re: Naive question on Japanese Debt

[eugenecoyle@xxxxxxxxxxx (Eugene P. Coyle)]

Michael wrote:
>
>So I still want to continue with my naive question.
>


        I've begun to think of a bank loan as a permission slip to use real
assets -- like steel or wheat, or cotton, or even the labor of people or
machines.  And when those assets  are used (up) they're gone.

        The piece of paper, the IOU, is a claim to have the real things
back.  But they're gone.  They have to be produced anew, somehow.  So what
is a bad loan?  Just a piece of paper that no longer can deliver the
production?  But the ability to produce -- the steel, wheat, whatever --
exists whether the paper IOU exists or not.  So a bad loan just means the
lender is poorer than it thought, but the society isn't -- or is it?

        Was the S&L bailout just taxing everybody to make the lenders whole
again? But that would be a transfer, wouldn't it?

        Gene Coyle