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Source link: http://archive.mises.org/9423/uncle-sam-cousin-maynard-and-the-miracle-seeds/

Uncle Sam, Cousin Maynard, and the miracle seeds

February 11, 2009 by

When trying to explain complex economic situations, it sometimes best to abstract from money and look at a simple economy — a barter market. Assume that the only market for a society is its Saturday farmers market. Folks come from far and wide to exchange goods (that which they can produce efficiently for that which they cannot).

One day, Uncle Sam and Cousin Maynard come to town with their wagon of stuff. In it, they have miracle seeds, which they exchange for real goods. The locals are excited; Cousin Maynard says these miracle seeds will triple the harvest next year.

Everyone goes into a frenzy based on these future crops — farmers trade for all kinds of current goods, using lines of credit based on next year’s abundance.

Everything goes swimmingly. The local economy appears to be booming. Then, a new visitor with a strong accent comes to town. Since this gentleman — who goes by the name Ludwig — is a horticulture specialist from a far-off society, the locals rush to show him a few of their miracle seeds. Ludwig takes a look, and then a second one. He laughs, “These are junk seeds. They won’t grow anything.”

With that, the economy goes into a tailspin. The farmers recognize that they will not be able to payoff their lines of credit as there will be no harvest next year — or, if there is time for a second planting, a small harvest at best.

Everyone is angry and scared. They turn to Uncle Sam. He smiles and opens the wagon once more to show an abundant supply of paper notes. “Don’t worry,” he says, “These can paper over any mess.”

We all know that this society has to go through some real pain. And we know that there is no way to paper over the mess. So why do folks continue to believe that things change when the numbers get bigger and the economy more complex?

Expecting the stimulus package to be the solution is a chasing after the wind — no matter what Uncle Sam and Cousin Maynard claim.

{ 8 comments }

David C February 11, 2009 at 11:33 pm

I’ve actually herd opinions on the blogs saying that the government should just give out 10000 dollar checks to everyone. They seemed clueless that the only way the government can do that is to ream them by far more than that in terms of inflation, debt, and taxes.

In fact, that’s pretty much why any stimulus plan will not work.

C February 12, 2009 at 5:31 am

When you and everyone else stops accepting paper money and stop working, please let us know, I’ll be more than happy to join you then. Must be nice to have resources to quibble over. Those of us at the bottom of the economy will just sit and watch and maybe pick the bones of the corpses :)

mhicks February 12, 2009 at 6:40 am

The real way out of this is an accross the board government spending cut of 33 % and an income tax holiday on personal and corporate income taxes for a year. However the demicans are putting their socalist framework into place and this whole problem was created by, for , and of our elected officals in order to maintain their power over the people. They truely do not understand the power of the market, but they are about to find out!

Deefburger February 12, 2009 at 8:44 am

Get Involved.
End the Fed!

http://endthefed.us/action.php

Kevin Hall February 12, 2009 at 10:49 am

I love the analogy! Perhaps this analogy is simple enough for average people to understand and realize just how destructive the system is. As for the stimulus, I am still amazed that individuals think a quick $500 now for an extra future debt burden of $4,000-6,000 is a good investment. If I knew my losses would be that significant, I think the sensible thing would be to avoid the investment like the plague.

Brock February 12, 2009 at 3:07 pm

That crazy Maynard is always up to shenanigans and Ludwig always has to save him:

http://bloodymarybreakfast.blogspot.com/2008/05/taming-tiger.html

Tim February 13, 2009 at 1:11 am

2000 years from now, people will actually think Mises was some legendary wandering horticulturalist who tried to dispell the stupidities and crowd delusions of the day based on this account.

flix February 13, 2009 at 5:15 am

Please somebody do a comic strip with these characters!
It’d be a perfect MI educational tool.

wasn’t there some Donald Duck comic about inflation? can anyone point me to it… can’t find it.

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