Tuesday, May 19, 2009

Asia will author its own destruction if it triggers a crisis over US bonds

Imagine, if you will, a thousand peasants sweating in a corn field as they scythe up this year's harvest for their Lord, the Red Baron Obama.

In a fit of madness, the Red Baron rides down from his castle and informs his serfs that he is going to withdraw into his castle, lift up his drawbridge, and never open it again.

The Red Baron then disappears within his walls, to a call of triumphant trumpets.

What is to happen to the peasants? Well, if we are to believe Ambrose Evans-Pritchard, of the Daily Labourgraph, they are going to starve to death.

Because they need the Baron to consume the vast bulk of the corn in the field. Without him to do this consuming, they will find no outlet for their production, and therefore they will enter a fatal liquidity trap.

But then, one mad peasant, called Petrus Shipmeister, steps forward from the huddling mass and asks the following daring question in his rough Austrian accent:

"Hey guys, vy don't vee just let that idiot rot? Vy don't vee just eat zis corn ourselves and become the main consumers for our own productive effort?"

"No," cry out two English peasants, Conway and Bootle, who have been receiving a secret stipend from the Baron for years, to preach obedience to the peasants. "Can you not see that without the needs of the Baron's table, the import and export flows will be impaired and the corn multiplier will be destroyed? We must keep working and then throw the corn in sacks over the wall, to keep the Baron going until his madness leaves him."

"No," say the rest of the peasants. So they threw Conway and Bootle over the wall instead and continue to become the wealthiest and happiest peasants for miles around, selling off excess corn to surrounding markets and using the subsequent capital injection of gold to improve their corn output, until within a few years they are the richest, healthiest, and best fed men in the kingdom.

After a few years, one of these new merchant-peasants is standing beside his newly invented mechanical thresher, innovated out of the saved corn capital. He looks up at the forbidding walls and dares to ask the question, "I wonder what happened to the Baron?"

All of the peasants look up at the high walls of the castle. For a few years they had been afraid of the Baron sending out his twelve heavily-armed knights and stealing their corn again, thus sending them back into subsistence. But now they are quite heavily armed themselves, after diverting some of their corn profits into defensive pikes and crossbows.

"Screw him! Der Baron ist ein Loser" says Shipmeister, who is now hailed as a patriot and a hero, despite his rough Austrian accent.

And so they all lived happily ever after.

Except the Baron. Who had long been dead, due to his stupidity and self-imposed isolation.

Hat tip to Matt.


Paul said...

Nice one, Peter Schiff has the same story as Asians and a American on a lonely island.

Jack Maturin said...

Great minds think alike! :-)

(Or more likely, I subconsciously lifted his story and changed a few details to protect the innocent.)