Wednesday, July 27, 2011

Economics explained

Finance stories on the news can be dull and difficult for ordinary people to grasp. I think should try something like this:

I go the Petersham Bakery and these big chocolate donuts which are just $1.20. It's far cheaper than I could ever make them and they taste awesome so I buy them. Now just imagine I'm America and the Petersham Bakery is China. Also imagine that instead of paying cash for my donut I ask for them to put it on my tab and instead of buying one donut a week I buy a few billion. Basically the situation is that the Petersham Bakery doesn't want me to stop buying donuts because I'm their best customer. At the same time they are starting to get a little worried about how I am ever going to pay off my tab. My doctor is also telling me that if I don't cut back on the donuts a heart attack is imminent but to stave off the threats posed by donut withdrawal I should allow myself a few more donuts.

Basically I need to go and do something productive rather than just getting fat on cheap donuts. Going on a diet, working hard and paying back the bakery is not really a fun option though, so it's a bit of a quandary as to what to do.

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