A fairy tale about the economy

This just in: Once upon a time, there was a country made up of 1,000 individuals.

These individuals worked together to create an economy for themselves.  There were hard workers that tended the crops and hard workers that minded the banks.  There were lazy people at the top, living off of inheritances and there were lazy people at the bottom, living off of the government.

There was a wide range of incomes.  The richest person in the land had $100 million in the bank. He’d made some of his money through hard work; some was inherited and some was perhaps a bit shady.  The next richest person had $1 million in the bank.  He owned nearly every company in the country.  There were several people with $100k in the bank.  About 50% of the population had no savings.  The average income in this country was $50K a year.

This country had a government consisting of 1 person.  This person made all of the decisions that any government was expected to make.

One day, the richest person in the country approached the government and said, “I will give you $5 million if cut taxes on businesses.”

The government readily agreed to this.  It cut taxes on all of the country’s businesses.  This caused it to borrow $100 million from China to make up for the lass over the next few years.

The results appeared to be spectacular.

The richest person now had $200 million due to lower taxes.  This caused the average wealth in the nation to go from $50,000 up to $150,000.  The newspaper, which was owned by the richest person, ran headlines that read, “Tax cut triples the average wealth of our citizens!!!”

No mention was made of the newly acquired $100 million debt to China.  No mention was made of the fact that only 1 person in the country actually benefited from this debt.

The government certainly didn’t say anything.  It quietly accepted its payment from the nation’s richest person and acted like nothing had happened at all.

A couple of years later, the country’s economy started to feel the strain of making payments on its China loan.  Since taxes were cut, there was no money left for healthcare, pensions or infrastructure.  The country’s people became poorer and poorer; even as the rich became richer and richer.

In the end, the country’s economy collapsed.  Those with money were able to bail out and live elsewhere.  Those that were left behind…well they lost everything as China showed up to collect their debt and there were no resources available to stop them.

The End.

Up, up and away…

Jim

 

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