"Sorry Bob, you know my policy, no loans."
"I don't want a loan, I have plenty of riches. Look at the paper, it has my special mark on it. I'm the only guy around here rich enough to make fancy marks on paper like that. You can show this piece of paper to every merchant around here and they'll all tell you I'm good for it. They'll tell you I'm rich and have gold hidden in the hills."
"Suuuure. As a matter of fact, I will pay you one orange tomorrow for every apple you give me today."
"Hey Oliver, I'll give you ten apples for every eleven oranges you hand over."
"Mister, I got those oranges."
"Cool, lay 'em on me."
Oranges are exchanged for pieces of paper.
"I still don't understand why we need this paper, Bob, I'd feel a lot more comfortable with something useful, like real gold, pigs, or apple pies or something."
"Well, Mister, those papers are my guarantee to you that I'm going to eventually pay for the apples. I used to carry gold, but it was too hard to pull it around in the cart. The wear and tear on the horses was bad. So now I just keep the gold hidden at home, and I hand out paper."
"But how do we know you really have the gold?"
"Well, does it make a difference? The transaction is over, everyone got what they needed, I got a few extra oranges for my troubles, who's complaining?"
"I don't know, Bob, something sounds fishy. How many of these papers are out there in the hands of your customers?"
"Well, I used to."
"WTF, Bob? It's clear from my own initial interaction with you that at the end of our transaction, there was no paper left over. You took it all back, and gave me payment, just like your note promised."
"I paid you what I owed you."
"Sure you did, Bob. And presumably, you took the paper on which you made that promise, and voided it out, indicating that the contract had been satisfied on both sides, and that neither you nor I had any further obligation of payment to the other."
"Well, effectively, yes, I did that."
"What did you really do, Bob?"
"Like an arbitrary decree? That makes no mathematical sense."
"Yeah, remember our apple orange deal? Apples have value. Apples are worth apples. Oranges have value too, and depending on who you talk to, oranges are worth about one apple."
"Yup, we had a valuable batch or apples and a valuable batch of oranges involved in the equation. Both delicious."
"Right, but nowadays, folks would say that the paper I lent you was valuable too, as valuable as 100 apples."
"Yes, but you paid for it from the value of your apples, and I extracted that payment by taking a few extra oranges from Oliver. He has a surplus anyway. But that amount is much smaller than the promise on the paper itself. See where I wrote "100" on the paper there?"
"Well, the actual value of the convenience of the transaction - that's the service I provided to you - was only about 10 oranges. Not the #100 that you see on the paper. That's all I could get out of Oliver. But it pays for the horseshoes and the cart maintenance, and I get a little extra for getting drunk on Saturday."
"This is very confusing, Bob. So what is your paper really worth?"