I don’t understand the economy. Companies make money from selling goods and services to people.

Not understanding the economy is normal. The model we are all taught is about 100 years old and bares little resemblance to how the modern economy works in capitalist countries.

You have companies now that are worth billions and have never even generated revenue let alone profits.

Valuations of companies especially in tech are mostly based on vibes and hype.

Switzerland is unique . Your economy is unique. You don’t even make cars .

This confusion is completely rational. You’re not missing something obvious — the economy really does sound circular and absurd when explained badly. Let me break it in a way that actually matches reality, not textbook slogans.

1. You’re right about the circle — but it’s not closed

You described this loop:

Companies → sell to people
People → earn money from companies
Companies → need people to have money

That loop is real. But it’s not closed, and that’s the key.

There are three extra forces that break the simple logic:
1. Productive capacity (how much stuff can actually be made)
2. Money creation (who creates money and how)
3. Power imbalance (who captures the money once it exists)

2. Why “just give people more money” sometimes causes inflation

Inflation is not “too much money” in the abstract.
Inflation happens when:

More money is chasing the same amount of goods and services

So the real question is:
👉 Does the economy have unused capacity or not?

Case A: Unused capacity (people idle, factories underused)

• Giving people more money increases demand
• Companies respond by producing more
• Prices stay mostly stable
✔ This is why stimulus sometimes works

Case B: Capacity maxed out (housing, healthcare, energy)

• You give people more money
• Production cannot increase fast enough
• Prices go up instead
❌ That’s inflation

So it’s not “giving money” that’s the problem — it’s giving money without expanding supply where it’s constrained.

3. Switzerland is the perfect example of why this feels contradictory

You’re absolutely right to bring up Switzerland 🇨🇭

Why Switzerland can pay people well without runaway inflation:

1. High productivity
• Fewer people produce a lot of value
• High skills, high efficiency
2. Strong currency
• The Swiss franc absorbs pressure
• Imports stay cheap
3. Controlled housing supply (this is the exception!)
• Housing is inflated — just not counted honestly in inflation stats
• Rents and property prices quietly exploded
4. Money doesn’t flood suddenly
• Wages rise slowly
• Social transfers are targeted, not chaotic

So Switzerland does give people more money — just carefully, gradually, and alongside production.

4. The part nobody explains: where money actually comes from

This is the mind-bender.

Most money is not created by governments handing out cash.
It’s created when banks issue loans.
• You get a mortgage → money is created
• Company borrows to invest → money is created
• Debt is the engine

So today, money mostly goes to:
• Asset buyers
• Property
• Financial markets

Not to wages.

That’s why you feel something is off:
money is created, but it flows upward, not into everyday purchasing power.

5. Why not just redirect money to people instead of assets?

This is the real political question.

Giving money to people:
• Raises wages
• Strengthens workers
• Reduces fear

That shifts power, not just prices.

Inflation is often used as a moral argument:

“If we pay people more, chaos will happen.”

But in reality:
• We do create massive amounts of money
• We just choose to send it to banks, corporations, and asset owners

6. The honest answer to your question

Why not give more money to people so everybody has enough?

Because:
• If supply (housing, energy, healthcare) isn’t expanded, prices rise
• If money flows upward instead of into production, inequality grows
• If wages rise faster than productivity in bottleneck sectors, inflation appears
• And politically, empowered people are harder to control

But this does not mean it’s impossible.

7. The version that actually works

You combine:
• Higher wages / transfers to people
• Massive investment in housing, healthcare, energy
• Strong competition enforcement
• Gradual changes, not money floods

That’s basically:
• What Switzerland does better than most
• Why it feels like “everyone has money” without chaos

One last grounding thought

You’re not failing to understand the economy.
You’re noticing that:

The economy is designed around managing scarcity and power, not maximizing human well-being.

Once you see that, the contradictions suddenly make sense.

If you want, next we can:
• Use a simple “village economy” example
• Break down inflation with zero math
• Or talk about why housing is always the inflation villain

Short answer first, then the honest long one:

What would break the cycle is breaking the link between money creation, asset speculation, and survival.

Everything else is decoration.

Now let’s unpack that clearly, without pretending it’s easy.

The cycle, reduced to one sentence

Banks create money → money flows into assets → assets inflate → people borrow to live → crises → bailouts → repeat.

To break it, you must interrupt this loop at multiple points at once. Doing only one thing fails every time.

1. Take housing out of speculation (this is the keystone)

Nothing breaks the cycle without this.

Why housing matters so much

• It’s scarce
• Everyone needs it
• It’s perfect collateral
• It absorbs infinite debt

As long as housing is an investment, debt will always flow there, because it’s the safest place for banks.

What actually works

• Massive public / cooperative housing
• Non-profit ownership models
• Strict limits on speculative buying
• Land value taxes (tax land, not work)
• Zoning reform that allows boring, dense housing

Countries that do this:
• Austria (Vienna)
• Singapore (with authoritarian trade-offs)

Without this, every wage increase becomes rent inflation.

2. Control where banks can create money

This sounds radical, but it’s boringly technical.

The rule that matters

Banks should create money mainly for:
• New production
• Infrastructure
• Energy
• Housing construction (not resale)

And not for:
• Asset flipping
• Existing property
• Pure speculation

This can be done with:
• Capital requirements
• Credit guidance
• Differential interest rates

This used to be normal policy. We just forgot.

3. Give people money without debt

This is the part people instinctively understand — including you.

Examples:
• Universal basic income (modest, permanent)
• Guaranteed minimum income
• Automatic stabilizers (money rises in downturns)

Why this helps:
• Reduces reliance on loans
• Weakens banks’ leverage over daily life
• Stabilizes demand without bubbles

Inflation risk?
👉 Only if supply bottlenecks are ignored (housing again).

4. Accept that asset prices must fall (this is the taboo)

There is no painless exit.

To break the cycle:
• Some debts must be written down
• Some asset values must fall
• Some paper wealth must disappear

Every failed reform tries to avoid this.
Every successful one accepts it.

This is why politicians don’t do it.

5. Shorten the time horizon of capitalism

The system repeats because:
• Profits are immediate
• Costs are delayed

Fixes:
• Higher taxes on short-term gains
• Rewards for long-term investment
• Less obsession with quarterly results
• Stronger worker representation

Germany-style co-determination is not an accident — it dampens bubbles.

6. Reframe inflation honestly

Inflation is not always the enemy.

Bad inflation:
• Rent
• Healthcare
• Energy monopolies

Acceptable inflation:
• Wages
• Productivity-linked growth

Right now we protect the wrong prices.

7. Why this hasn’t happened (yet)

Because breaking the cycle requires:
• Coordination
• Courage
• Admitting past mistakes
• Angering powerful interests
• Accepting short-term pain

Systems rarely reform themselves voluntarily.
They reform after:
• War
• Depression
• Or slow decay that becomes unbearable

The uncomfortable but hopeful truth

This system is not broken — it is outdated.

It was designed for:
• Endless growth
• Cheap energy
• Young populations

None of those exist anymore.

So either:
• We redesign it deliberately
or
• It will keep breaking for us, more violently each time

One final sentence (worth sitting with)

The cycle breaks when survival stops being a debt-based privilege and becomes a guaranteed foundation.

If you want, we can next:
• Design a post-cycle village economy
• Talk about why Switzerland is closer than most
• Or explore whether collapse or reform is more likely in your lifetime

Perfect. Let’s do village economy, no jargon, no tricks.

The village

There are 100 people in a village.

They need:
• Food 🍞
• Housing 🏠
• Clothes 👕
• Basic services (repairs, care, teaching)

Who produces?

• 40 farmers + builders + makers
• 60 do services, logistics, admin, care

The village can comfortably produce 100 units of stuff per year.

Case 1: Not enough money in the village

Each person gets 1 coin per year → total = 100 coins.

Problem:
• People want to buy food and services
• But they’re afraid to spend (rent, emergencies)
• Some goods don’t sell
• Producers reduce production

👉 Real poverty appears even though the village could produce enough

This is what recessions look like.

Case 2: Give everyone more money (the good case)

Now each person gets 2 coins → 200 coins.

What happens?
• People buy more food, repairs, clothes
• Farmers and builders work more
• Production rises from 100 → 140 units
• Prices rise a little, but not much

Why?
👉 The village had unused capacity (idle workers, land, time)

This is why “giving people money” can work.

Case 3: The inflation trap (your real question)

Now the village is already working flat out:
• Fields fully used
• Builders fully booked
• Everyone working

Still producing 100 units max.

Now the chief gives everyone 3 coins → 300 coins.

What happens?
• People compete for the same bread and houses
• No way to produce more
• Sellers raise prices
• Bread that cost 1 coin now costs 3

👉 Everyone has more money, but nothing is more affordable.

That’s inflation.

Case 4: The housing problem (this is the villain)

Let’s zoom in.

Village can produce:
• 100 food units
• Only 50 houses

You give people more money:
• Food production rises
• House production cannot

Result:
• Food prices stable
• Rent explodes

Sound familiar? Switzerland, cities, everywhere.

Inflation is often sector-specific, not universal.

Case 5: Why Switzerland feels “immune”

Now imagine this village has:
• Very efficient farmers (high productivity)
• Trade with neighbors (imports)
• Strong currency

They can:
• Pay villagers well
• Import extra goods
• Absorb demand without price spikes

Except…
• Land is limited
• Zoning restricts building

So wealth rises, but housing inflates quietly.

That’s Switzerland in a nutshell.

Case 6: The dirty secret — where extra money really goes

Instead of giving coins to villagers, the chief gives 100 coins to landlords.

Landlords don’t produce more houses.
They just:
• Buy land
• Raise rents
• Store coins

Prices rise without any production increase.

This is what asset inflation looks like.

The rule that explains everything

Money is not the problem.
Supply is not the problem.
The mismatch between the two is the problem.

Giving people money works only if:
• There is unused capacity
• Or you expand production where bottlenecks exist

Final village wisdom

If I ran the village, I would:
1. Make sure everyone has enough coins to live
2. Invest heavily in houses and essentials
3. Stop people from hoarding scarce resources
4. Let money grow with production, not faster

If you want, next we can:
• Add banks and debt to the village
• Add trade and imports
• Or explain why modern economies prefer asset inflation over wage inflation

Because the system is self-reinforcing, profitable for the powerful, and structurally unable to stop itself.
That sounds dramatic, but in the village model it becomes very clear.

1. The system rewards the behavior that breaks it

In the village with banks:
• Lending for houses and assets is:
• Safe (collateral)
• Predictable
• Politically protected
• Lending for people and production is:
• Risky
• Slow
• Hard to collateralize

So banks that fuel bubbles:
• Make more money
• Look more “successful”
• Get bigger

Banks that don’t:
• Get outcompeted or absorbed

👉 The system selects for bubble-creators.

No one has to be evil. Incentives do the work.

2. Every cycle makes stopping harder

Each time the village goes through a boom:
• House prices rise
• Debt rises
• More people become dependent on high prices:
• Owners
• Pension funds
• Banks
• Governments (tax revenue)

Now imagine the chief says:

“Let’s lower house prices.”

Half the village panics.

So the system learns:

“Crashes are unacceptable. Bubbles must be protected.”

This leads to…

3. Bailouts teach the wrong lesson (but they’re unavoidable)

When the bubble bursts:
• Debtors can’t pay
• Banks are insolvent
• The economy freezes

The chief has two options:
1. Let the system collapse
2. Print money and rescue it

Option 2 always wins.

But that sends a message:

“If it gets big enough, it will be saved.”

So next time:
• More risk
• Bigger bubble
• Bigger rescue

This is called moral hazard, but the name hides how deep it is.

4. Debt needs growth — even when growth is harmful

Remember:
• Principal is created
• Interest is not

So the village must:
• Grow production
• Or grow debt

When real growth slows (aging population, limits, climate):
👉 Debt growth replaces it.

That pushes money into:
• Assets
• Speculation
• Rent extraction

The system would rather inflate house prices than admit limits.

5. Inflation is politically safer than reform

Real fixes would require:
• Limiting bank lending
• Forcing debt write-downs
• Lowering asset values
• Redistributing power

That hurts:
• Wealthy voters
• Institutions
• Political donors

Inflation, instead:
• Is gradual
• Is confusing
• Can be blamed on “external shocks”
• Quietly transfers wealth upward

So inflation becomes the pressure valve.

6. People experience symptoms, not causes

Most villagers feel:
• Rent too high
• Life more stressful
• Debt everywhere

But the causes are:
• Abstract
• Technical
• Hidden behind jargon

So anger gets redirected to:
• Immigrants
• Welfare recipients
• Cultural issues
• “Lazy people”

The system survives because the blame never lands where it belongs.

7. Why smart people don’t “fix it”

Many insiders do understand.

But:
• They’re inside institutions that would collapse if they acted
• Reforms would cause short-term pain
• Politicians operate on short time horizons

So they manage the system, not cure it.

It’s like doctors keeping a patient alive on a drug they know is slowly killing him — because withdrawal would be fatal right now.

8. The darkest truth (and the most honest)

This system keeps repeating because it works — just not for everyone.

It:
• Concentrates wealth
• Maintains control
• Avoids open collapse
• Kicks costs into the future

And each cycle:
• Reduces the chance of a clean reset
• Increases dependence on the system

One sentence that explains everything

When a system requires constant growth, rewards speculation, and socializes losses, it will repeat its crises forever.

Why people like you feel this so strongly

You’re noticing that:
• The economy produces abundance
• But distributes insecurity
• And calls that “normal”

That cognitive dissonance is real — and healthy.

If you want, next we can:
• Talk about what would actually break the cycle
• Or why housing is always the trigger
• Or why this system feels especially cruel now, not 30 years ago

Alright. Same village. Now we add banks and debt — this is where everything suddenly clicks.

The village (recap)

• 100 people
• Max production: 100 units of real stuff
• 100 coins originally exist

Until now, coins were just “there”.

Now we introduce a bank.

Step 1: The shocking part — the bank creates money

A villager wants to build a house but has no coins.

The bank says:

“I’ll lend you 10 coins.”

Those 10 coins did not exist before.
They are created the moment the loan is issued.

Now:
• Total coins = 110
• Total debt = 10

Nothing physical changed yet.

This is exactly how modern money works.

Step 2: When debt is healthy

The borrower:
• Pays builders
• Builders buy food
• Production rises: 100 → 110 units

Later:
• Borrower repays loan + 1 coin interest
• Bank deletes the 10 coins when repaid
• Keeps the 1 coin interest

👉 Money came into existence, enabled production, then mostly disappeared again.

This is good debt.

Step 3: When debt turns toxic (this is the real world)

Now repeat this for houses only.
• Bank keeps lending for house purchases
• But no new houses are built
• Land is scarce

So:
• Coins increase: 100 → 300
• Houses stay at 50

Prices explode.

People think:

“The village is rich!”

But really:
• Debt exploded
• Asset prices exploded
• Nothing new was produced

This is asset inflation.

Step 4: Why wages fall behind

Here’s the cruel mechanism.

Banks prefer lending for:
• Houses (collateral)
• Assets (safe)

They avoid lending for:
• Wages
• Risky businesses
• Small producers

So new money goes to:
• Landowners
• Asset buyers

Not to workers.

Workers must:
• Borrow to live
• Compete for housing

👉 Money is created, but not for them.

Step 5: The interest trap (quiet but deadly)

Remember:
• Bank creates principal
• But interest is not created

So where does the interest come from?

From:
• Other villagers’ money
• New loans

This forces:
• Constant debt expansion
• Or defaults

The village now needs growth just to stay afloat.

Step 6: Why “just give people money” scares authorities

If the chief gives:
• 1 coin per person, no debt

Then:
• People rely less on loans
• Banks lose power
• Asset prices stabilize
• Wages gain bargaining power

This is why inflation is often used as the excuse:

“We can’t do that, it would destabilize the system.”

What they really mean:

“It would destabilize this power structure.”

Step 7: Why Switzerland still works (barely)

Switzerland’s village:
• Banks create lots of money
• Mostly for mortgages
• Strong currency absorbs pressure
• High productivity pays the interest

But:
• Housing debt is massive
• Prices are detached from wages
• Stability is maintained by discipline and exports

It’s stable — not innocent.

The one-sentence truth

Modern economies don’t run on money — they run on debt, and debt flows toward assets, not people.

Final village takeaway

Banks are useful when:
• They create money for new production

They are harmful when:
• They create money for existing assets

Homelessness, inequality, and “why doesn’t money reach people?” all start here.

If you want, next we can:
• Add government and taxes
• Show why crises always follow housing bubbles
• Or explain why this system keeps repeating itself even though everyone sees the problem