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Friday, January 25, 2008

Smokey Briggs

Sage Views

By Smokey Briggs

The girls
discover inflation

Last weekend friends of ours came for a visit. Their middle child, Kelsey, fits age-wise between our oldest two daughters, Ruby and Carson and the three play wonderfully together – tearing out the door after breakfast to play until being forcibly hauled in at dark.

This weekend they spent most of their time camping and playing in the area behind the house that used to be a pipe yard. The pipe yard is now filled with the castoff remnants of years of oilfield activity and a mesquite orchard.

Apparently, at one point, the three decided to each build their own fort/house and began to scavenge useful building materials.

As they found useful stuff, they began to trade it back and forth, and according to Ruby and Carson, they then decided to open up their own “shops” selling their treasures to each other.

Not being dummies, they soon decided that money would be a useful thing to have, but discovered that they really did not have enough pennies and such to make do.

So, they established a currency of sorts.

Bolts became the agreed upon currency, the bigger the more valuable, and apparently their local economy was booming as they traded scrap to build forts using bolts for money.

But then the girls discovered a barrel full of bolts/money.

At first, they were all thrilled with their newfound wealth, but their enthusiasm faded quickly.

“It wasn’t much fun then,” I was later told.

“Why not?” I had to ask.

“Everybody had lots of bolts,” I was told with a shrug and a look that said, ‘Well duh, Dad, everybody had all the bolts they wanted, so why would you trade a good piece of rusty, tetanus-coated tin for a bunch of bolts.’

“If somebody wanted something she would just go get more bolts from the barrel.

“Yeah, and then nobody wanted to sell anything for bolts.

“Why should I, I could just get more bolts from the barrel.

“It didn’t matter how many bolts you charged…

The explanation and examples were long and numerous and animated as only young girls can communicate, but it boiled down to the fact that once the huge barrel of bolts was discovered, bolts lost their value.

What had been scarce became common, and when that commodity became common, it lost value.

Faced with a valueless money, the girls reverted back to a barter economy and soon were discovering building materials, building forts and trading goods happily again.

But for a while, their economy had come to a screeching halt.

Kelsey, Carson and Ruby’s transition from a suddenly inflated currency of rusty bolts to barter was no big deal for their little economy.

Their supply lines from “manufacture” to point of sale were short, and their economy was pretty simple.

Eventually they discovered some new item that caught their fancy, and it became money – as it was fairly scarce in the confines of the pipe yard, small enough to carry around and shiny enough to be have value for young girls with lively imaginations.

And there you have it folks, from the mouths of babes – everything that is wrong with America’s economy, discovered, and then fixed, by three young girls playing in the ruins of the last oil boom.

Yet, a couple hundred million grownups cannot even conceive of the problem, let alone find the guts to fix it. The Federal Reserve is the barrel of bolts in the American economy. At the behest of the federal government, it creates money everyday – mostly in the form of easy credit that in essence becomes cash the moment a person takes out a loan at a bank.

Our supply of bolts keeps increasing, so everyday the bolts are worth less, and hence buy less.

It is called inflation, and when you think about it, it is one of the most evil devices ever conceived of in the history of man’s conceiving of evil devices.

Every year, every month, every day, the money you saved yesterday, is worth a little bit less – and consequently the prices of what you need to buy are higher.

Politicians love it because by inflating the money supply they can spend more money than they ever could just be taxing their constituents. Spending more money helps them keep getting re-elected as they funnel money to the favored few through building projects, contracts, and handouts.

Banks love it because they get to loan and then charge interest on money that does not exist.

For politicians and the owners of banks, it is a free lunch – a lunch that citizens pay for as they watch the value of their paychecks shrink month to month.

Gradually at first, but then faster and faster, what we call an economy begins to choke on all this worthless money.

So, when the economy begins to choke, what do the government and bankers do?

This month President Bush and Congress hatched a plan to send free money to everybody, or almost everybody, and the Federal Reserve slashed interest rates.

Both sound great, like finding a barrel of money, but both will have the effect of dumping more cash into the system and driving down the value of our dollars even more.

What we do not need is more worthless money. What we need is money that will hold its value over time.

Money that will buy the same amount of gasoline next year as it did last year.

Eventually, we are going to discover what Ruby and Carson and Kelsey already know – eventually too many bolts will render all bolts valueless, and when that happens, nobody is willing to trade something for a useless handful of bolts.

When that happens, we will be reduced to trading stuff without that useful stuff we call money.

Somehow, I do not think that will work out as well for us as it did for the girls.

But, I’m not too worried. I just walked through the warehouse where we store the 1,000-pound rolls of paper we print newspapers on.

I figure that when U.S. dollars are inflated to the status of rusty bolts, I will have about 40,000 pounds of grade-2 toilette paper to trade.

I wonder how much grade-2 toilette paper I will have to trade for a cheeseburger?

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