Thursday, October 30, 2008

Credit is Time Travel for Money

Credit is like time travel for money. When you take out a loan, your future earnings travel backward in time so you can spend them in the present. As time passes and you arrive in the future, you find that you have less money available because you are paying back the loan, in effect sending the money back to your past self.

Some people look at today's "credit crisis" and ask "but where did all the lost money go then? What happened to it? Does that mean it never really existed?" I prefer to think of the time travel analogy and imagine that the lost money disappeared into the past.

(This is just a metaphorical story of course, not a technically accurate explanation.)

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