Imagine you’re at a baseball card show, or a comic book show. You’re walking around, taking a look at what is being offered. You may buy something. You many not. In any case, you’re just trying to enjoy your day off immersed in one of your hobbies.
Then something weird happens. A bearded professor walks into the ballroom with a megaphone. He claims to be from an Ivy League school and he hysterically shouts that trade must “pick up” at the show. Get those transactions moving! If trade “slows down” it’ll be horrible for “the economy”.
You naturally look at the professor as if he were nuts. Everyone would ignore him and go about what they were doing before he gave his two cents over the megaphone.
What business is it of his? If you buy something, or don’t buy something, that’s your decision. You’re not concerned with some abstraction known as “the economy”. You don’t live for “the economy.” You live your life peacefully, trying to make the best decisions that you can. You may want to save your money and either buy something else at another place, or save it for another day altogether.
The professor notices that no one cares about his unsolicited advice and grabs the megaphone again. He shouts that you should not save your money. When you do, you’re actually hurting the economy.
Again, you look at the guy as if he has a screw loose. There he goes with that “economy” talk again. What does he think the economy is, a mechanical machine? Does he fancy himself as the owner of this fictional machine? Am I a cog in one of the wheels?
In reality, the economy is nothing but an abstraction. It’s not a thing. It consists of millions and billions of individual transactions. Each one is made by individual people and based on each particular person’s value scale at the time of the transaction. Because the circumstances of life are forever changing, so are everyone’s value scales.
You could’ve went to the baseball card show with the intention of spending $500 on your favorite player’s rookie card. But just as you were about to hand over the money, your cell phone rings. Your wife tells you that the air conditioner died. In a split second, your value scales changed. No more rookie card. The AC needs to be fixed.
Life is largely unpredictable. There are so many variables involved in every moment of the day, we can’t know with certainty as to what is coming next. Because of this unpredictability, we may choose to sock away some money for a rainy day. What if the car breaks down next? What if one of the kids get sick?
This nutty professor is telling everyone to spend, spend, spend, and not to save anything. Why doesn’t he mind his own business? Why doesn’t he concentrate on his own decisions? Who’s he to tell people what to do with their property?
The professor walks out of the ballroom dismayed. No one listened to his advice. People went about their day, and he ended up being just an odd blip in their day.
Not content with people disobeying his commands, the professor goes back home and starts typing on his computer. He writes a five hundred word essay for The Government Times on why central planners at the Federal Reserve should artificially suppress interest rates. “If those recalcitrant people want to save their money, let’s see them do it with interest rates at 0%,” he chortles to himself.
“Better yet,” the professor thinks, “the central planners should print trillions of dollars that the government can spend on wars and welfare. That’ll keep the economy moving for sure.”
The central planners (and government) love this kind of advice. The professor gives them cover. He provides the excuses for them to do what they want to do anyway! What a guy!
Sadly, everyone else is put into a bind. Everyone is now faced with an artificial situation. You can’t keep money in the bank because interest rates are 0%. Even if you were to put money under the mattress, it continually loses purchasing power because trillions of dollars are being printed. What kind of bizarro nonsense is this?
The nutty professor and central planners have turned life into their plaything. Everyone is just a toy in their freak show experiment. People spend themselves into unmanageable debt. Government spends itself into really unmanageable debt. People have nothing for a rainy day. Government creates the rainy days with its relentless interventions.
The nutty professors come up with the most bizarre excuses to keep the unsustainable going: “Debt doesn’t matter.” …. “We owe it to ourselves.”
Whenever the artificial takes over, the return to reality is always painful. We all know what it’s like to be drunk as a skunk. The return to seeing the world as it is the next day is a painful one. We can wish the hangover away, but the die was cast when the Jack Daniels was poured. There’s no escaping the pain.
The professor would say: “Well then keep drinking. Then you never have to face the hangover.”
What a nut.