Thursday, April 5, 2012

A simple metaphor: Tubs

A tub, filled with water.  There is a faucet and bucket on the floor.

A person could do one of two things with the water.

  1. They could use the faucet to put more water in the tub.
  2. They could use the bucket to move the water to different portions of the tub.
In this decidedly simple metaphor, the tub and the water inside, is the economy, and the money that makes it up. 

In the first example, the person is like the free market, the private sector in our economy, literally putting more money into the economy.

In the second example, the person is like the government, futilely moving money around, but not making any themselves.

And before you ask: Yes, this IS actually how the economy works, in vastly simplified terms.  The private sector puts new money in, the government decidedly does NOT.

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