Economics for Dummies

Well, boys and girls, I suppose it is time to teach you all about Economics. You might ask what good it is to learn this, and I can tell you that this course will explain why your mommies and daddies are looking so scared these days, and why they keep changing the subject when you want to talk to them about getting your allowance for this week.

At any rate, it starts with something called the Market. Now this is not the place that you go at the end of the block to get eggs and milk or other things. No, this Market is a place where supposedly grown men and women buy and sell little pieces of paper which supposedly can be exchanged for things like gold and oil and land, or for companies that trade in those and other things.

Now it is not quite true that they are just buying and selling these little pieces of paper. They are betting that the value of these little pieces of paper will keep rising, so that they can sell these pieces of paper for other pieces of paper called "money", and for more money than they originally paid for them.

What happens occasionally, though, is that people in the Market sometimes pay a lot more for those little pieces of paper than the product which they are connected with are really worth. We won't be getting into the reasons why that happens in this course. We will be saving that for the course in Abnormal Psychology, when we talk about Mob Psychology. All that you need to know for right now is what Agent K said in the movie Men in Black: "A person is smart. People are dumb."

A couple of hundred years ago, economists started noticing dumb things like people willing to spend up to fifty-five thousand pieces of silver for a Holland tulip bulb. Last century it was a lot of people buying a lot more pieces of paper called "shares" than there were actually shares of a company.

When this happens, some people get kind of smart, and realize that they've bought a lot of vapor rather than substance. And then they also get kind of smart, and decide that they are going to sell their pieces of paper before others get wise as to the fact that those pieces of paper have no value. But then more and more people get really dumb, and decide that they will sell at any price, just so they can get a little back from what they paid for. When this happens to a stock or set of stocks, they call it a market adjustment. When it happens to a whole market, they call it a recession. And when it happens to all of the markets in the world, they call it a depression.

Now when you have a depression, what you have is a great number of depressed people. When you use the word "depressed" about peoples' psychology, it means that they are either unwilling or unable to feel or think or do much of anything. And when you use the word "depressed" economically, it means that they do not have either the capital or the will to do much of anything. And when you have a depression, it means all of those things at once, and for a long, long time, too. It is not a pretty picture, boys and girls. Believe me, you do not want to have a depression anywhere near your family or friends or country.

Unfortunately, boys and girls, that looks just like what we are about to have. Now when something this bad happens, a lot of really smart persons become just a bunch of dumb people. Let's try not to have this happen here with us, shall we, kids?

Now, one dumb thing that lots of dumb people do is to blame each other, rather than find out what has gone wrong, and why. And some smart people who have done dumb things blame others the most loudly, mostly to keep people from finding out what dumb things they have done.

It looks like that with Congress. Now, boys and girls, we won't be doing the lecture in Political Theory yet, in which we will learn a good number of things, including why Politics is not a science, and what Congress is good for, if anything. No, all that you really need to know is that since the word "pro" is the opposite of "con", that the opposite of Progress is Congress.

Seriously, though, a wise man long ago once noted that in any place where the many rule, they tend to vote for what they want, instead of what they need. That, and the fact that, as Agent K said, people are dumb, and that there are a lot of people in Congress.

Basically, boys and girls, the people in Congress wanted two things. The first thing that they, or at least some of them wanted, was for everyone in America to be able to buy and own a home of their own. The first one who wanted this to happen was a people (I know, Sally, that what I said was not grammatically correct, but he most definitely was not a person) named Senator Proxmire. Now as we all know, a Proxmire is a great bog in which anything living or useful gets mired down and dies. And the Senator was true to his name.

Senator Proxmire decided that it was so important that everyone be able to buy a house that he made it a policy that just about anyone could be loaned money to buy that house, whether they could afford it or not. The people who voted for this wanted it so much that they decided that they would not think about what could happen from this.

Now, the person who has been keeping this policy going is a "people" by the name of Congressman Barney. No, this fellow may be big and lumpy like Barney, and he may talk funny like Barney, and he may occasionally wear purple like Barney, but believe me, boys, you do not want to go sitting in his lap. I will explain later, when we have the course in "Abnormal Psychology", and discuss Human Sexuality and its variants, but for right now, just trust me, boys. You'll be glad you did.

Now what Congressman Barney did was perhaps something that a "people" would do, but it looks as though he meant well. It also looks as though some other people in Congress meant well, and they honestly believed in something called "trickle-down" economics, which seems to mean that things will get better if the rich make wee-wee on the poor. These people believed that if you just did not watch for any thing bad happening in the Market, nothing bad would ever happen.

But what happened is that a lot of people took out loans to pay for their homes, but did not have enough money to pay for those loans. And what also happened is that these bad loans got put together with a lot of other loans, and all these loans got attached to little pieces of paper, and the people in the Market bought and sold all of these little pieces of paper. And they started buying and selling these pieces of paper for much more than they were worth. I think that we know by now where this is leading, boys and girls.

This might have worked, as long as the price of land and the homes on them continued to rise. But at some point, just recently, even that price started to fall, and then to crash. Then a lot of "people" looked around, and found that they were in a game of Musical Chairs, the music had just stopped, and there were a lot fewer chairs than there were bottoms to sit on them.

Now that we know what is happening, the next thing for a smart person to do is to figure out what to do about it. The first thing that most "people" think to do is to do nothing. The last time that that was tried was by a President Hoover (who did not invent the vacuum cleaner, or anything useful like that. Remember what I said about depressions. President Hoover's decision brought on something called "The Great Depression". Only there was nothing great about it, except the suffering it caused. As the eminent philosopher, Rocket J. Squirrel, would say: "But that trick never works!"

Then there are some who think that we should get a lot of money from the government and have it buy up all of those bad loans, and for the government to own all of the buildings until such time that the people can buy them back. Some people have said, "But this is socialism!", and gotten everyone scared of that particular bogeyman.

Now, boys and girls, one of the ways, both in fairy tales and in real life, to destroy the power of a bogeyman is to find out its true name, or rather, what its name means. Now, the word "Socialism" means a system of government involving state ownership of all of the means of production. That means that the government owns all property and every way that some one can make money. It does not seem to me that the emergency purchase by the government of some land equals government ownership of all property. So much for "socialism".

As a matter of fact, there was a fellow by the name of Adam (no, not the father of mankind, but the father of Capitalism) who once said that government should be able to take care of dangers to the economy that individuals and the Market can not. This would seem to be one of those things that need taking care of, and which persons and the Market cannot. I believe that you kids call that one a "no-brainer."

But for those who are still afraid of government control (and, boys and girls, that is a real and honest fear), then why doesn't the Federal Government investigate the situation, and make judicious loans to businesses, until the price of land rises again and both the bad loans can be made good and the loans to the government paid back. Can you say "Bailout", boys and girls? I knew you could.

But the point of bailing out a leaky vessel is to do so before the ship founders and those in it drown. It looks like the world markets have lost half of their value which they had just three months ago. It also looks as though the market has just lost about six percent of its remaining value just today. Better start bailing, kiddies. Otherwise, I'd suggest that you get your allowance from your mommies and daddies Real Soon Now.