One Response to Lunchtime jam

  1. quixote January 7, 2013 at 12:17 pm #

    I wish folks like Krugman would start using a water wheel metaphor. Much easier to grasp than his babysitting club and other examples.

    Individuals are like one paddle on the wheel. Money/water flow is linear: money comes in, money goes out, and you don’t see it again. Nations are somewhat closed systems (and the planet is completely closed), so the money/water cycles round again and keeps the wheel turning. It’s lifted by taxes and a combination of everybody’s economic activity.

    When there’s not enough water/money the wheel stops. More money gets it started again, and it can come from anywhere, but it better come from somewhere or the whole wheel stays stopped. I.e. austerity can’t work. Duh.

    The fact that an individual paddle on the wheel doesn’t work that way has nothing to do with the way the whole wheel works. For some reason that seems to be a difficult concept for many important bankers, economists, talk show hosts, and other serious people. I know I’m preaching to the choir on this unserious blog, but I’m venting.

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