Friday, June 3, 2011

Got Milk?

I told you in yesterdays post I've been doing some reading. One of my new fascinations has become economics. That is mainly because I have seen it coming up in the news so much and there were an awful lot of terms I just plainly didn't understand. I am not fond of being in the dark. I'd rather tackle a whole lot of reading to at least grasp a little of what you're saying than pretend 'I get it' when I really don't. You can also be sure that if I don't get something, I'll let you know. One of the biggest questions I had was: what is Quantative Easing? It is mostly written up in headlines being referred to as QE1 and QE2. Every time I read it I wondered what a cruise ship had to do with the economy and figured too many politicians and bankers were going on luxury vacations at once. But something didn't add up. So I did a little homework. Apparently QE'ing is a way to help us through the economic hardships we are currently facing by getting more money on the table where there was not enough before. Hmmm.

I am hoping to make this much more simple for you by a few pictures below that should drive home the point nicely. Stick with me for a moment. 

Lets say for arguments sake that this gallon of milk is the money supply. ( in my house it pretty much is- we go through 8 gallons a week on average.) Let's also say I get this supply from Farmer Joe. Farmer Joe has excellent cows which he raised for years. He feeds them the best grains, no artificial hormones and gives them plenty of land to roam. 

But Farmer Joe also has a gambling problem. 

One day Farmer Joe finds himself in more debt than he can climb out of.He has lost most of his herd and has only a few left that he can barely feed.In fact he only has half a gallon left for me and my house when I go to pick up my order.

Farmer Joe doesn't want to lose his whole farm so he calls up his Uncle Sam. Uncle Sam says "Joe you've been such a wonderful nephew for so long and people have become so dependent on your milk that you are just too important to let go under, so I'm gonna help you out." 

Uncle Sam comes in and gives Farmer Joe some more 'milk' to sell to me for his customers including me and my house. ( This is where QE1 comes in) 

Here's where you might object:
 WAIT!!! Ellen, Ellen thats not milk! He actually diluted your milk and added some water! Don't be fooled! It's lost some of its value!

Come on folks, what is milk ANYWAY? Don't cows really eat grass and grain and drink water and turn it into milk? Isn't it still white? Can't you still use it over cereal? Certainly it will still make the coffee the right color, won't it

And to all those questions the answer is well, yes, sort of. It is still white and it is after all mainly water with some important fats and vitamins and minerals mixed in.

Then you'll ask but doesn't it go through a whole process in order to become milk? Well, sure but let's pretend it doesn't . ( wealth it turns out- is actually not simply paper with presidents pictures on it- that would be money. Do not confuse these two concepts. Paper money can be printed by a press. Wealth is the resources you owni.e. tractors, tools, home, farm- including that green paper with the pictures on it which symbolizes your purchasing power. )  

Now lets give the kids some cereal or better yet, lets give Sophie a bottle. Does your stomach get a little pit in it about now? Don't you kind of feel like Sophie is getting a raw deal here? She really needs those vitamins, and all that fat for her brain to develop properly doesn't she? ( that would be the sweat equity and hard work you've got in your 'wealth')

 Maybe you'll argue that skim milk isn't quite so white either. Still, we could probably use it for cereal in the morning. Maybe we could fool the kids  for a while longer when it gets poured on cereal. ( In this analogy the kids would be code name for you dear reader- whatever party you belong to it affects us all equally.)

But what if Farmer Joe still wasn't able to make enough to cover all those bad debts? Gosh, this time we should just let him fail shouldn't we? He just doesn't seem to learn his lesson. It kind of serves him right. But Uncle Sam wants to give him another chance. So he gives him more 'milk'.(Here comes QE2) 

This time it looks a lot more like skim milk. I actually tasted it too. It tastes like ...water. 

Now I bet you'd feel really bad if I give that bottle to Sophie wouldn't you? In fact you probably feel pretty bad for my whole family who is still paying for the milk ( actually now we're paying a bit more) but is actually getting less for it. 

Its also important to note that while I may be able to fake it through the cereal crisis ( maybe) Its unlikely I'll be able to take that 'milk' and make yogurt out of it right? What about ice cream? I probably will never be able to make ice cream again with milk that is so diluted. That really is a tragedy. Just ask Fred. 

The moral of this story is the milk ( money) supply is being diluted. There is talk of a QE3 on the horizon and I have to wonder if its really even fair to call it milk any longer.

So,I just have to ask all of you now...

* editors note- no children or adults were fed diluted milk in the making of this blog. But I did waste about half a gallon of milk.

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