The credit crisis made simple

My mind and brain want to make sense of things. I wish our economy made sense to me. Here is an attempt at it.

It’s hard to know where to start. Maybe back when we left our cave for the day, you to find food and me to find water. We’d bring them back to the cave and share our bounty. Then Joe joined us but he didn’t get as much on his forages as he ate. So we invented money. We put a lot of it in a pile and when somebody brought home some food, he took a certain amount from the pile. When he wanted something from the coffers, he put it back.

Some of us discovered that if we worked harder and brought back more them we needed, we would accumulate our own piles of money.

As time went by our group got bigger, and we decided to build a school. To pay for it, each of us put the same amount of money in another pile. We took some of that pile and gave it to builders, some to textbook writers, and some to teachers. They used that money to buy food and water from the foragers. The foragers then discovered productivity. If they brought back more and more food and water, they made more and more money. Eventually, the foragers accumulated a lot of money. They decided to build houses. To do that, they gave money to the builders and gardeners and interior decorators.

Money was circulating among all of us. As the foragers got more productive, there was more circulating money.

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