Wednesday, October 13, 2010

Actually, We Aren’t All in This Together – the rest of the story

(the story continues for everyone but economists)

There came a time when the local business growth started to slow. And because Sam’s trust was invested in local business equity and not in safe bonds his income stopped.

Sam started dipping into the principle of the trust that was lovingly set aside 200 years ago, the money that should have lasted forever.

Common sense told Sam that there was only one thing to do. He must reduce his spending in the bar down to the amount that the accountant had recommended. This was the only sensible long term solution. Local business owners would have to stop their excessive borrowing and get though this economic downturn by themselves.

Also, it seemed to Sam that some of the local business owners were horrible at what they did and shouldn’t be in business at all. They spent all their time at the bar as they borrowed more and more money from Sam.

If the bad business owners shut down, wouldn’t the other owners prosper?

And if they wanted drinks, Sam was happy to provide them in the evening. It just didn’t seem right that they should borrow money from Sam with no hope of paying it back as they spend all of their time in the bar.

When Klugman heard that Sam was considering slowing his spending at the bar, he became enraged.

Sam must keep up his spending. Everyone depended on him. It didn’t matter if some business owners were absolutely terrible at their trade; it was heartless of Sam to put them out of business.

“Remember, we are all in this together.”

So it went. Sam spent his principle as the economy stagnated. There were too many businesspeople servicing too few customers.

And everyone spent too much time at the bar.

As always happens with imprudent spending, the money disappeared as if it had never existed.

Sam lost the trust that was handed down lovingly for 15 generations.

He still comes to Bernie's everyday, but never drinks. He just takes his same old seat at the bar and stares off into the distance. He is mostly ignored by all except when stories of the boom are discussed.

He does not exist in the town’s economy today. And if you believed Mr. Volcker he never really existed in the first place. Except as a distortion in the market.

In the town, many of the local businesses that were created to feed the boom either closed down or moved away.

The local economy is back to average. The town is exactly as before.

Back to what our ancestors would call the American Dream.

When they get together at Bernie’s, the people who lived through the boom never seem happy. They long for the golden days of unbridled prosperity and of course they miss the free drinks.

This lament stops when Klugman comes into the bar. He spins tall tales of a future of growth and riches.

Because that’s what economists do.

Everyone brightens up and talks of tomorrow,

and the next boom that will be even bigger than the last.

The End

(If you are anyone but an accountant this is where the story ends.)

Thanks for reading


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