November 2008 Archives
Wow, what a series of events.. most of which went unnoticed. It almost went completely unnoticed until Mary, in a quiet moment by the lake, began to pondered on a few things...
Having talked with everyone at the picnic Mary realized that the Village income for the summer was $5,000. She decided to call this the Gross National Product (GNP) --that is, the sum of all the goods and services created in the village.
She thought back and remembered that the winter GNP was $1,740. Because it was so low people felt unhappy and worried that they made so little during the winter. The "economy" seemed to be pretty bad. Because people didn't make much money they didn't spend much. That meant that others didn't make much and hence didn't spend much. An untidy little circle. They didn't have many new things and only spent what the really needed.
During the spring the GNP for the village shot up to $5,000! That was 287% increase by Mary's calculation! Everyone was elated and feeling comfortable -- thinking about vacations and enjoying all the things they bought during the spring. The economy was moving right along. People made money, or had it coming, so they spent easily. The spending generated income for others who, likewise, spent more because they felt confident about their income.
So, almost a 300% increase in the economic engine for our little village. But Mary noticed something very interesting. During the winter there was $10,000 in the village. During the spring there was $10,000 in the village. Both periods had the same amount of money but a completely different result. As she pondered this she came to understand that it didn't matter how much money was in the village, what mattered was how many time it changed hands during the three months she measured. It was the speed of money, not the amount of money, which determined how "good" the economy was.
She also came to an astounding realization... With $10,000 in the village they could have an unlimited amount of income between them. If they moved the money fast enough they could each make $15,000 during the summer for a total GNP, or income, of $60,000 total. Oh My Gosh! They'd all be rich! But... on the other hand... If they didn't move it they would all make $0 and they would all be poor. Fascinating...
She also realized something else. They used to work for hours. An hour of John's work for an hour of James's work for an hour of Patricia's efforts. The change to the dollar just meant that they kept track of the hours with dollars... one dollar for one hour. However, this all changed at the beginning of the spring because John offered a discount to get Mary's work earlier. The seemed to happen all spring with people offering discounts to get a job earlier, offering a discount to get a little more work on extra items on a project. When Patricia was too busy to move some materials for Mary's project, Mary offered her an extra 25% bonus if she'd moved her cable spools first so that John could install it.
Somewhere along the lines, without realizing it, they had gone off the "hour" standard... just as the US had gone off the gold standard. A dollar wasn't worth an hour, it was worth... it was worth... ummm... hmmm.. it was worth.... what????? Mary had to give this some serious thought.
Mary decided there was a lot more to think about in this new economy of the dollar.... it wasn't all that it originally seemed to be. It wasn't worse... just very, very different than it seemed like on the surface.
So the total winter income for all the village was $5,000 (compared to $1,740 for the winter). Spending was $5,000 compared to $1,740 for the winter.Again, those number are equal because no one borrowed any money and there is no trading with other villages.
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Posted by Paul Gernhardt on Nov 24, 2008
The summer picnic is always a wonderful introduction to summer. This year's was particularly so. The day was brilliant with a few soft puffy clouds. A cool breeze came off the lake. James made a wonderful BBQ brisket, Patty a vegetable medley, and Mary such a blueberry pie that everyone couldn't get enough. Must to everyone's pleasure John cleaned up afterward... which considering what happened with his mystery casserole last year, was probably for the best. Everyone sat happily around the fire as the sun set into the east... which everyone considered a little odd but were much too polite to comment about it, and far too well fed and relaxed to worry.
As they head into the hot months and plan vacations they are all pretty pleased with spring. James has two people looking at the house he built on spec... One is a cousin of John and another is a couple from the next village. Mary installed the new cable months ahead of time, spurred on by John's offers to start early. That put the higher speed internet access into James' new house which was of great interest the couple looking for houses. Mary had two quotes out for moving the household belongings of Jame's perspective buyers.
All in all it was a particularly busy spring for everyone and the summer was beginning to look more so. Mary wanted an addition to her house and some new kitchen cabinets. Jame's was looking forward to getting a large payment for house. John new there would be the work for Mary's house, plus that for whoever purchased James' house, Patricia for all the moving and the normal incoming items for the winter stockpiling. Mary new a new custom would be coming to town and more income from everyone with the new features she could offer on the new cable.
A quick review of where things were for people:
Mary spent quite a bit on the new cable so her total spring expenses were about $2,000 while she made $640 during the winterending up with $3,640.
Patricia spend nearly $1,100 catching up on things she did without during the winter. She felt able to spend the money because she mad $1,100 as she carefully kept the pile at $2,500.
James didn't do quite a well keeping the funds even as he put a lot of finishing touches on the new house with less time for items which brought in money. He did manage toe earn $1,000, but spend nearly $2,100 on supplies and transportation. As a result he was down to just $900. He was looking forward to the income from selling the house he built.
John was doing better having worked on everyone items, particularly the early work for Mary. He earned $2,260 and only spent $800 ending up with $1,960. He felt much better than he did at the end of the long winter.
So the total winter income for all the village was $5,000 (compared to $1,740 for the winter). Spending was $5,000 compared to $1,740 for the winter.Again, those number are equal because no one borrowed any money and there is no trading with other villages.
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Posted by Paul Gernhardt on Nov 24, 2008
Oh spring is such a wonderful time. The annual rebirth of nature brings such warmth to everything. Spring is welcomed in our little village with a gathering of everyone in the town square. They work for a few days to get the common areas ready. Cleaning, repairing, planting, improving, and having a wonderful time together. The time together helps renew their friendships and consider what's in store for the village in the coming year.
They talked about how little work there was during the winter. The introduction of the dollar helped them see it as never before. James talked about how used the extra time to finished the house he was building. Now all he needed was someone to buy it from him. Mary made some improvements in the server software which increased the speed for everyone's internet connections. Patricia worked a bit on maintenance on her equipment, but mostly relaxed and read books. John spent a lot of time on the internet.
Once everyone was happy with the improvements the had their traditional spring party. As was typical, quite a bit of the party was spent talking about the projects everyone had for their personal and business lives. While this seemed a very informal social party, our folks didn't realize that the friendly discussions were the kick-off to each person's big business season. Each project discussed had impact on the others. If someone purchased James' house then Partricia might have an opportunity to get the job moving people in. Mary would get a new customer, and people always needed a lot of little things from John when they moved in.
Mary's plan to replace an old cable to the next village meant Mary would be getting a large wire shipment in. John would need to make some connectors and junction boxes, James might have a chance build a small shed for the server equipment.
The village is a small place, just about everyone's project means opportunity for the others. During the party people didn't think they were selling things to each other, but they were unconsciously making mental notes about the upcoming work opportunities.
John was worried. Most of the projects he heard about wouldn't start for a month or so. Most likely his pile of dollars would be exhausted before the jobs were ready. Before the party John asked Mary if she had any work for him in the next few weeks, perhaps he could get a jump-start on some of the items she'd need for the new cable installation. She said she wasn't ready to start putting things together, but he suggested that he could provide them sooner for a bit of a discount on the price. She considered the option and, after a bit of sales work on John's part, agreed.
The party also represented an informal meeting of the community where the talked about what improvements and changes might be needed in the village. If another person moved into John's house there were a few things in the village that might be needing upgrades. There was a discussion about how to interest someone from the next village to move in, and how it would impact their little community. Everyone was awash with ideas for an expanded community... as well a bit fearful of what changes would result.
And so the season started... with big plans, happy people, and a bright future. No one was aware that on that day their village experience a fundamental change in their basic economic model. The change wasn't necessarily good or bad, but it was a very, very large shift... and happened with barely a thought, without a vote... the changed passed silently without note.
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Posted by Paul Gernhardt on Nov 04, 2008
Human beings find it far easier to generate emotional energy by being against something rather then being for something. Populist leaders find it far easiest to manufacture a common enemy as a basis for uniting people towards achieving the desired goal (which is most often to gain position/power). Once the common enemy is defeated (or having served their purpose, conveniently forgotten) the bases for the new-found unity ceases to exist.
We must always be aware of what is to remain as a basis of leadership once the common enemy is no longer in play.
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Posted by Paul Gernhardt on Nov 02, 2008
As we head into winter our villagers settle in for the brief period of cold weather. As it typical for this time a year not much really happens. The group doesn't build many buildings,have many things made, or move them very far. Internet, phone, and TV use is up, as can be expected, but two month ago Mary moved to a flat-rate monthly fee so her income is stable and the expense more predictable for the others.
Even with the slow-down things break and get fixed, folks need to move things, and little things here and there do need to be made. Overall, however, people are not working as much as usual.
Mary made $640 during the winter, spent about $300, and ended up with about $5,000 in her pile.
Patricia earned $400 during the winter and spent $400 so her pile ended up at $2,500. She went without a few things she wanted in order to help keep the pile at a good "safe" $2,500.
James did well. During the winter he only made $400 and spent $500, but ended up with just over $2,000, largely because the funds from building John's workshop last fall. D
John had a lean winter. He did make $300, but spent about $540 from his pile. He ended the winter with only $500 left in the corner. He was feeling a little worried. He never worried before, but the pile seemed so much smaller than when he started.
Everyone was pretty happy though, the village is a pleasant enough place to live with much stress. The dollar thing was working out, even if people were a little more fixated on what they had than they had before the dollars came around.
So the total winter income for all the village was $1,740 (Mary's 640 + Patricia's 400 + John's 400 + plus John's 300). Total spending in the village was $1,740. Those number are equal because no one borrowed any money and there is no trading with other villages.
Even though the spending and earning numbers were the same we can see that the amounts were different for everyone. Some came out ahead, others a little behind while Patricia, as always, came out the same.
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Posted by Paul Gernhardt on Nov 01, 2008
A government always reflects the people it governs -- an odd combination of their ethos and their apathy.
Laws are simply a complex way to codify the culture's collective moral values.
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Posted by Paul Gernhardt on Nov 01, 2008