We are living in 'The Bad Loan Universe'.

In the good loan universe, loans are repaid and the 'money supply component' of lending disappears as a part of the process of repayment. In a well- managed fiat system there is never more credit issued than is demanded by productivity. Productivity in the good loan universe as measured in a transparent and equitable way. The rate of return or earnings on money lent is productive only as it produces value to the original borrower.

In the Bad Loan Universe, laundered credit is considered capital and the resulting inflation is considered productivity. Here, currency exchange is imbalanced and surpluses are loaned against creating even greater money supply and allowing even more bad loans, since there is always more currency than there are good investment opportunities. The flood of cheap money encourages consumption over investment. Loans eventually fall into arrears, consequently, they never disappear from the creditors' books. The money supply component created with each original loan remains. At the same time, the additional money supply component created to rescue the lenders from bankruptcy or to service the currency imbalances are added to the swelling total of unpayable loans. It's the worst of all possible universes; the money supply expands exponentially while the created credit always remains attached like a leach to the original lenders' balance sheets ... and their foolish successors'.

At the center of The Bad Loan Universe this successor dwells, that bloated, feverish black hole of zombie credit, 'The Federal Reserve Bank'. It swells with bad loans that never disappear, but requiring nevertheless more and more interest from the surrounding productive universes. The more bad loans it swallows, the more bad loans it propagates, since all loans that fall into its ambit become tainted by the ralationship and considered 'bad'. 'Sound' planets and nebulae become insolvent in a matter of days, weeks or ... hours, ss their borrowed collateral is rendered equally suspect as that actually within The Bad Loan Universe.

The story has an unhappy ending, I'm afraid ... so I won't tell it. You have to use your imagination.

A new universe of good loans will soon arise from the radioactive plasma left behind by the vaporization of The Bad Loan Universe. If its inhabitants are clever, it may have several different money supplies, that accurately measure and service the different social functions that will require finance. There should be a 'basis' money that values resources and rewards husbandry. A good loan universe would have a free exchange of different currencies while keeping enough separation between them so that problems with one don't infect the others. In the Niewe Good Loan Universe, currency imbalances are quickly rectified by entities buying and selling reserves and monitoring exchange rates, rather than lending against accumulated foreign currency reserves.

Finally, The Good Loan Universe will understand that money supply is only a tool and its misuse will rapidly cause the good lending environment to morph into another Bad Loan Universe.