Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Why? Money is not conserved in the real economy either.

Let's see, if there is a cash flow on an edge, the amount is subtracted from the balance of the starting node, and added to the balance of the end node. The total of the balances doesn't change.

Instead of exchanging cash along an edge, an IOU at a discount may be exchanged. Say A has to pay B 100 but instead pays B with an IOU for 105 payable a year later, with "the market" agreeing that that IOU has a present value of 100. The balance sheets of A and B still change in ±100 now, so the total balance is still conserved.

But the total side of the whole network's asset (or liability) side has increased because this IOU didn't use to exist.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Carrie (migeru at eurotrib dot com) on Thu Jun 10th, 2010 at 09:12:50 AM EST
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