| every single non-bank business finances the assets with liabilities of equal or greater maturity.
Yes! Businesses do not want to finance long-term assets with short-term liabilities! As X41 used to say, "Wouldn't be prudent."
You're almost there. You've figured out how money loaned out by the millions for 20 years can wind up in the hands of thousands of consumers in little tiny chunks. Now design a way to scoop it back up and aggregate it into one big pile of millions that can be loaned out for 20 years to build the next factory. Electricians call this "completing the circuit." As soon as you complete the circuit, the money will flow and we can have an economy. To do this, you'll need a special device called a "maturity inverter." This is the thing that takes in money in little tiny chunks from people who can't afford to not see it again for 20 years, and sends it to the output in the form of one big chunk of 20-year money. Be sure to install the maturity inverter with a proper risk sink and a risk fan, because these things generate a lot of risk when they operate. But without them, you don't get to have an economy.
|
Congratulations! You have broken the code! Yeah! Hooray!
So they sell 20-year bonds. And they use the money to put up a factory. And they pay construction workers who build the factory. And once the factory is built, they buy equipment. And the equipment makers pay their workers.