If A borrows from B, A now owes B
Then C shows up and pays B with the agreement that it settled A’s debt to B.
A does not know any agreement was made but the original A owes B
A goes to pay B.
B says A doesnt owe B.
C says A owes C
But A did not make an agreement that he owed C.
How does A owe C now?
It seems to me that: C gave A the gift of settling A’s debt to B.
In: Economics
B sold the right to profit intrest money from A
for C, if A wont deflaut his debt, C will profit the diffrence between what he paid B and what he will get from A
Real fun begins when C has a lot of those debt notes (bonds) and can create more money that he has by selling toxic waste that is CDO- and only those who read repports of each single original loan taker credit history will actually know what given CDO contains.
So investors buying CDO (party D in this scenario) are betting against deflaut rate ( how much A’s will actualy pay in full?) and it can go multiple levels and CDO can contain parts of other CDO (CDO^2 or even CDO^3).
Basically 20th century released worst thing in history of capitalism, fractional reserve banking, where debt is money
So most people work to pay their debt with debts of other entities.
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