Shortly after class, an economics student approaches his economics professor and says, “I don’t understand this stimulus bill. Can you explain it to me?”
The professor replied, “I don’t have any time to explain it at my office, but if you come over to my house on Saturday and help me with my weekend project, I’ll be glad to explain it to you.” The student agreed.
At the agreed-upon time, the student showed up at the professor’s house. The professor stated that the weekend project involved his backyard pool.
They both went out back to the pool, and the professor handed the student a bucket. Demonstrating with his own bucket, the professor said, “First, go over to the deep end, and fill your bucket with as much water as you can.”
The student did as he was instructed. The professor then continued, “Follow me over to the shallow end, and then dump all the water from your bucket into it.” The student was naturally confused, but did as he was told.
The professor then explained they were going to do this many more times, and began walking back to the deep end of the pool. The confused student asked, “Excuse me, but why are we doing this?”
The professor matter-of-factly stated that he was trying to make the shallow end much deeper.
The student didn’t think the economics professor was serious, but figured that he would find out the real story soon enough.
However, after the 6th trip between the shallow end and the deep end, the student began to become worried that his economics professor had gone mad. The student finally replied, “All we’re doing is wasting valuable time and effort on unproductive pursuits.
Even worse, when this process is all over, everything will be at the same level it was before, so all you’ll really have accomplished is the destruction of what could have been truly productive action!”
The professor put down his bucket and replied with a smile, “Congratulations. You now understand the stimulus bill.”
Larry. We get it. Redistribution of wealth 2009
Larry, this sounds like a little Sunday school parable … who was that professor? I’m gonna google “noble prize winner in economics” for 2008 (Paul Krugman ?), and see what he says on the subject. I don’t trust Sunday school parables, then again I know the political right doesn’t trust professors from Ivy league schools or intellectuals in general … maybe a professor from Bob Jones University or Liberty Baptist would be OK.
There are two ways to grow the economy – Increase the supply of money or increase its velocity (spend quickly). Due to run on highly leveraged financial institutions the supply is decreasing so we’re left with spending (the stimulus). Will it work? No one really knows – all we can do it hope.
How about the redistribution of wealth due to tax subsidies for home loan interest & employer paid (nanny state) health care. Let’s end them!
SAHS
How simple can we present what is happening in our country today? I think the illustration can be understood by anyone who is paying attention to president Obama’s Agenda.
I love how Republicans say that The New Deal didn’t bring us out of the depression but WWII did. You do realize that WWII was massive Government spending, right?
This is the contradiction that drives me crazy. I’m sorry to tell you that you are irrelevant and your ideas are wrong. This example is simplistic, just as simplistic as calling a tax cut for 95% of Americans redistribution and Universal Health Care the “Nanny State”.
Heather,
No Republican says WWII brought us out of the depression. Democrats are the ones who claim that, in order to enforce their “Government spending is the answer” ideology.
Anyone who knows better shouldnt. All that happened was 10 million men were put in uniform. There was no economic stimulation. And if building tanks and planes would do it, we could do it now and just drive them into the ocean. TRUE economic stimulation was AFTER the war, when government was reduced 2/3.
You are the one who is irrelevant. Since 95% of Americans dont pay taxes, that IS redistribution. And Universal Health Insurance IS the nanny state. Since we already have Universal Health Care.
95% of Americans don’t pay taxes? You’re kidding right?
And it’s Republicans who have said that the new deal didn’t work, it was WWII. I’ve heard Hannity say, Limbaugh and scores of other commentators.
PAUL KRUGMAN.. your going to ask his advice one of the biggest socialist far left people in america . oh i forgot he works for the ny times
If you can correctly identify and describe the problem, then you will have 90% of the problem solved. This little parable didn’t define the problem, and that is why it results in confused, circular thinking that is so commonly found in “belief over science” missteps. Personally, I have issues when one of these internet folk stories use “students” as the target audience. That goes double for narratives by/to talking animals, small children and the village idiot. If the dialogue is identified as having an intellectual level of half that of a functioning adult from the get-go, then be prepared to be insulted by nonsense. It will be stupid and unsupportable by adult reasoning and critical thinking skills. Fyi ~
Here is an alternative explanation of the economic crisis. See if it doesn’t help you understand the problem better for possibly yielding coherent solutions:
THE FINANCIAL CRISIS EXPLAINED IN SIMPLE TERMS:
· Heidi is the proprietor of a bar in Berlin.
· In order to increase sales, she decides to allow her loyal customers – most of whom are unemployed alcoholics – to drink now but pay later.
· She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
· Word gets around, and as a result increasing numbers of customers flood Into Heidi’s bar.
· Taking advantage of her customers’ freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages.
Her sales volume increases massively.
· A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi’s borrowing limit.
· He sees no reason for undue concern since he has the debts of the alcoholics as collateral.
· At the bank’s corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS.
· These securities are then traded on markets worldwide.
· No one really understands what these abbreviations mean and how the securities are guaranteed.
· Nevertheless, as their prices continuously climb, the securities become top-selling items.
· One day, although the prices are still climbing, a risk manager (subsequently, of course, fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi’s bar.
· However they cannot pay back the debts.
· Heidi cannot fulfill her loan obligations and claims bankruptcy. DRINKBOND and ALKBOND drop in price by 95%.
· PUKEBOND performs better, stabilizing in price after dropping by 80%.
· The suppliers of Heidi’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation.
· Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.
· The bank is saved by the government following dramatic round-the-clock consultations by leaders from the governing political parties.
· The funds required for this purpose are obtained by a tax levied on the non-drinkers.
· Finally, an explanation we understand.
Nice illustration Red. Let’s see what additional comments are posted.
Perfect and one doesn’t even need Krugman’s Nobel Prize to figure it out and understand it.
It’s clear that this billion-dollar stimulus bill is good news from some people and not such good new for others. We can call these people Crazy Ann and Bert, respectively. Here’s their story:
http://theopenend.com/2009/03/12/a-tale-of-two-houses/
Hey Red … that’s the origen term “watch your p’s and q’s!” (although from the English Pub version of Heidi’s bar, more likely with a name like “The Prince and Trollop”). You better keep track of your “pints and quarts”, ’cause if you can’t pay up at the end of the week, you’re off the ledger!
Thanks, Larry. Glad to be of assistance! 😉
SAHS teacher – the main point of the story is that the unsuspecting get to foot the dang bill!
Argh!