QE explained - a riddle of beer bottle caps!
Assume, for the sake of this argument, that your government allows all productively employed adults one bottle of beer per week. The beer caps from such production and consumption are to be saved and after a period, say five years, can be presented as a deposit allowing the purchase of a home. The balance being paid off against you giving a commitment to surrender all your beer caps to the government, during another longer period of production and consumption, let us say thirty more years. At the end of that time the home becomes yours.
Used beer caps have thus become a valuable commodity in your society.
Now let us assume, those politicians who run everything in your country, are completely without scruples, and in order to obtain fancy entertainment, foreign travel and other favours; secretively and on the side, produce extra quantities of used beer bottle caps, over and above those needed to cap the entire output of the nation's breweries, to hand to their friends in productive industry. In order to retain their power, at every subsequent election, they also promise their voters some small portion of this extra bottle cap production, while nevertheless denying that beer cap supply exceeds the total national beer bottle production.
Worse follows with the digital age as devious financial institutions, discover they can produce virtual beer bottle caps, many of which, are likewise returned to the politicians, so that they may remain in power and purchase whatever they need in order to keep secret the now widely excessive beer bottle cap production from the wider population.
As more and more virtual bottle caps are produced, the demand for them gets ever greater and greater, so that after thirty years, even the productive worker now believes his home is worth two, three, four or even five times the number of bottle caps he has actually invested.
When everybody knows that this has occurred, and deep inside accepts that used beer bottle caps are actually worthless, the politicians abandon pretence and openly commence beer cap production, as if there were no tomorrow. This is called Quantitative Easing!
So here is the riddle: What is the home of the productive worker actually worth?
My answer will be posted here around this time tomorrow morning!
Used beer caps have thus become a valuable commodity in your society.
Now let us assume, those politicians who run everything in your country, are completely without scruples, and in order to obtain fancy entertainment, foreign travel and other favours; secretively and on the side, produce extra quantities of used beer bottle caps, over and above those needed to cap the entire output of the nation's breweries, to hand to their friends in productive industry. In order to retain their power, at every subsequent election, they also promise their voters some small portion of this extra bottle cap production, while nevertheless denying that beer cap supply exceeds the total national beer bottle production.
Worse follows with the digital age as devious financial institutions, discover they can produce virtual beer bottle caps, many of which, are likewise returned to the politicians, so that they may remain in power and purchase whatever they need in order to keep secret the now widely excessive beer bottle cap production from the wider population.
As more and more virtual bottle caps are produced, the demand for them gets ever greater and greater, so that after thirty years, even the productive worker now believes his home is worth two, three, four or even five times the number of bottle caps he has actually invested.
When everybody knows that this has occurred, and deep inside accepts that used beer bottle caps are actually worthless, the politicians abandon pretence and openly commence beer cap production, as if there were no tomorrow. This is called Quantitative Easing!
So here is the riddle: What is the home of the productive worker actually worth?
My answer will be posted here around this time tomorrow morning!
Labels: Beer bottle caps, QE
posted by Martin at 8:58 AM
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