THE
BOOZE CABINET
by Bernard Malouin
November 21, 2004
(submitted Nov 13)
As I prepare to give a conference on inflation, I was trying to find a
good analogy to something I could relate to, a life experience that
would allow me, in simple terms, to explain what it was. Here's what I
came up with:
Remember when you were 12 or 13 years old and you started to get interested in the booze cabinet? For some reason you had previously been warned that this was a "no man's land," punishable with the highest forms of privation and anyway, you knew that your mom would certainly find out if you were rummaging through the bottles... cause mom's seemed to have antennas for this sort of thing and also, there seemed to be a invisible line drawn on the bottle that would ensure the integrity of the content. What did you do?
Chances are that whatever you took from the vodka bottle, you replaced with water. At first, nobody noticed anything: the smell remained the same and the effect turned out to be pretty much was it was when the bottle was new. But the more you did it, the more diluted the content of the vodka bottle and the less "punch" you got from your favorite drink. If you were smart, you did it to the extent that it remained unnoticed but I am sure that many of us have been caught.
Well, this is the point of my story: if you have half a money supply bottle and you add water to fill it up, then your alcohol content: that is, the "punch" of your money, is half what it was originally. It might look full and the label says vodka, but it takes twice as many drinks to get the desired effect: that is, to buy the same amount of goods or services.
Someday, some mom will catch the Treasury and the Fed... although, I wonder what kind of punishment they're going to get.
If you have a good analogy to inflation, I'd be interested to hear about it.
©
2004 Bernard Malouin
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Bernard Malouin
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