The Story of Wealth Island

The banker was allowed to “lend” his way out of every problem because he controlled the supply of money. Everyone else was not able to do this, because they were at the mercy of the banker’s credit decisions. 

By MSDhaliwal

 

Hi … just felt this localised “story” would be a reading pleasure for the MT readers, the original one can be found here – http://secret-of-life.org/wealth-of-islands

The Story of Wealth Island —–

 

Ahmad, you have been stranded on a deserted island.

Ahmad – The Farmer
Soon after becoming stranded you realize you have to learn how to farm and catch food. At first life was difficult and it took you many hundreds of hours to figure out the most efficient way to catch fish, and set up your farms, but within a year you were able to reduce your work (catching fish and farming) to about 1 hour a day. The rest of your time was spent exploring the island, and laying about contemplating the great mystery of life.

Ah Chong – The Builder
A few years go by and then one day another person is stranded on the island, his name is Ah Chong and he used to be in the construction industry. Since you are already an expert on providing food it is decided that Ah Chong will work on building each of you a house. It will probably take several years, but since the island is warm year round you aren’t in any real hurry. Now you work 2 hours a day in order to create enough food for both you and Ah Chong. Ah Chong who doesn’t want to work any more or less than you also works 2 hours a day. So far so good.

What just happened? Why do you now have to work twice as hard as you used to? Because you now have to provide food for two people. This is ok, since now instead of just having food you now have both the food you need and will soon have a house. Although your new house isn’t as necessary to your survival as food, it’s still very nice to have.

Mutu – The Artist
A few months go by and guess what? Another cast away has landed, an artist whose name is Mutu. So the three of you decide that you will work 3 hours a day providing food for everyone and Ah Chong will increase his house building activities to 3 hours a day. For Mutu ‘s 3 hours, he will landscape the island, and create artwork out of various pieces of wood and stone. The beauty of his creations will enhance all of your lives.

You may have noticed that with the arrival of Mutu, you and Ah Chong now have to work 50% longer on your portion of the “economy.” This is because although Mutu ‘s artwork is beautiful and uplifting, ultimately it isn’t necessary and doesn’t affect the well being of “society” in the same way as the food that you produce. But just wait until the fourth inhabitant of the island moves in.

BeeEnd – The Banker
Our final castaway arrives and before he became stranded he was a banker. Upon arrival, he proclaims that money will make everyone’s life better. If you, Ah Chong and Mutu only had enough money you could all work one hour a day, live in big beautiful houses, and retire young and rich!

—– Debt-Funded Free Market Capitalism Begins —–

Fortunately BeeEnd had brought some old monopoly money, so it is decided among you and the other islanders that BeeEnd will create and manage the “money supply” of the island. Instead of dividing your work equally, everyone will work according to a free market system. You will continue to farm, Ah Chong will continue to build, Mutu will continue to produce artwork and BeeEnd will make loans and collect interest on them. You now work 4 hours a day.

Please notice, that while you, Ah Chong, and Mutu are enhancing your society, BeeEnd doesn’t actually DO anything except hand out monopoly money. But surely the wealth he is creating for all of you will be beneficial in the long run … right?

“Here is what we will do,” says BeeEnd . “I will loan each of us $100.”

“Don’t you mean you will give us each $100,” says Mutu.

“Of course not,” says BeeEnd . “That is not standard banking practice. The only way to create money is to loan it out. But don’t worry, you all have businesses right?”

“Yes,” you agreed.

“Ok then, nothing to worry about. The profit produced by your business will be more than enough to pay back the loans.”

You also decided to divide the land of the island into 4 equal pieces, which you use as collateral for your loans, and which you could buy and sell if needed.

A few years go by, you sell your food, Ah Chong builds houses, Mutu sells art and does landscaping, and BeeEnd makes money off of his loans.

However, in an effort to save money, everyone has cut back on their art purchases, and unfortunately Mutu is going bankrupt. Why? Although BeeEnd created the initial $400 he did not create the interest needed to pay back the $400 + interest, and since people are now saving money there simply isn’t enough money in circulation for everyone to pay back all of the loans, so someone has to go bankrupt.

BeeEnd forecloses on Mutu ‘s home, and since you and Mutu get along well, Mutu moves in with you. Unfortunately, this means the income everyone was once receiving from Mutu has now been lost. You raise your food prices to compensate. Unfortunately for Ah Chong he just finished all 4 houses, and is now out of work. Also, all of the initial loans have been repaid, which means BeeEnd doesn’t have any income either.

—– The Housing Boom —–

After evaluating the situation, BeeEnd has an idea. “Hey Ahmad, we need to get this economy jump started. Given the fact that you’re now the richest person on the island, and that you have an excellent credit history, I think I can loan you $400 to finance the construction of a huge new mansion! And hey, while I’m at it, I will take one too, this will really increase my income. This way Ah Chong and I can go back to work, and you and I will get some awesome new houses.”

“Yeah, but with that large of a loan, I’ll be losing money every month,” you say.

“Tell you what, I’ll give you an adjustable rate mortgage with a low introductory rate that won’t adjust for at least a few years. Ahmad please, this is a consumer society… if you don’t spend Ah Chong and I will lose everything! Don’t worry about it I can always refinance you if you need it.”

A few years go by, and as you predicted, you start losing money every month when your loan rate adjusts. So you raise food prices again. Ah Chong, seeing an opportunity, starts to farm and goes into competition with you, he is now working 8 hours a day on the mansions and the farms. Once this happens, you lose half of your income, and unfortunately you’re again losing money every month.

Meanwhile, BeeEnd still doesn’t do any real work.

You miss a few house payments.

“Ahmad, my friend, I noticed you missed a few house payments,” says BeeEnd .

“Sorry, I lost half of my income, and I can’t afford it.”

“Are you sure you don’t have a family member who can loan you some money? No? Well I guess foreclosure is the only option.”

“But you said you could refinance my home if I ever got into trouble, can’t you do that?”

“Ahmad, that was when you were rich. Times have changed, and I can’t really afford to take that kind of risk right now.”

And so BeeEnd forecloses on your house and your farm, and he rents out Mutu ‘s old house to you and Mutu. He then pays you a small wage to continue farming. He also gives himself a big new loan and buys Ah Chong ‘s house and his food business. BeeEnd now owns all 6 houses and the entire island. You and Ah Chong now work the farms you once owned, and rent the houses you once built. Meanwhile, BeeEnd who is no longer getting interest in your loan has just lost half of his income, and is also slowly going bankrupt.

—– The Economic Crisis —–

“Citizens of Wealth Island, we are now in the midst of a terrible recession,” says BeeEnd .

“With all of the losses I’m taking as a result of Ahmad, Ah Chong, and Mutu ‘s poor money management our banking system is on the brink of economic catastrophe. The situation is dire, and as non-bankers I can’t possibly expect you to understand the complexity of the problem.”

“I’ve already lost my business, and my home, if the economy collapsed I don’t know what I would do!” you exclaim. ” BeeEnd , you are the richest and smartest person on the island. Because of you we have food, employment, and shelter. Please, BeeEnd , tell us how to save the economy!” 

—– The Bailout—–

“Extraordinary times call for extraordinary measures my friends,” says BeeEnd.

“But, fortunately for you I do have a solution. I’m going to lend myself $1 trillion. This will save the economy.”

And this is where our society is today.

Story Symbolism

Obviously this story is a condensed version of what has happened in our own society. You may have to read it a few times in order to start to see the ridiculous situation the Island society is putting itself in, with monopoly money!

Ahmad represents the people in society who do the work that we could not live without, such as producing food, water, and power.

Ah Chong represents the makers of marginal goods, things which make life easier, but only to a point. For example, a house makes life a lot easier, but owning a huge mansion doesn’t really make much of a difference.

Mutu represents producer of our luxury items, things we don’t really need or even use, but which are nice to have, such as art, entertainment, and luxury goods.

Finally, BeeEnd represents the financial industry who hands out the monopoly money we all use. Meanwhile they collect 1/3 of the nation’s profits, live luxurious lifestyles and own all of the largest buildings in town.

Some things you may notice:

• The less the non-producers worked, the more everyone else had to work. In other words, since BeeEnd only issued “money” and didn’t do any real work, you and Ah Chong had to make up for this by working even harder and longer at your jobs, to provide food and housing for BeeEnd .
• Mutu, the artist wasn’t allowed to work and contribute because “there wasn’t enough money to go around.”
• The person who really wasn’t contributing was BeeEnd the banker, in fact his debt was poisoning society.
• Adding money to the system didn’t make everyone wealthy. It was the labor and the ingenuity of the workforce that created the wealth of society. Adding money just consolidated power in the hands of the person who controlled and issued it, the banker.
• The inhabitants on the island actually built 6 houses for 4 people even though there was nothing wrong with the original 4 houses.
• The bank was on the verge of collapse several times, and the only way it could save itself was by issuing more loans (which put society into even more debt).
• The banker was allowed to “lend” his way out of every problem because he controlled the supply of money. Everyone else was not able to do this, because they were at the mercy of the banker’s credit decisions.
• BeeEnd, the banker, slowly gained control over the entire island, while the people who actually created the wealth lost everything.
• Did the island really even need BeeEnd at all? Could it be possible that there is a better way to manage our exchange of goods and services, than through loans from private banks?
• For those of you that don’t believe the money will run out, try this story using real numbers and see what happens.