QE explained–A riddle of beer bottle caps!

Assume, for the sake of this argument, that your government allows all productively employed adults one bottle of beer per week. The beer caps from such production and consumption are to be saved and after a period, say five years, can be presented as a deposit allowing the purchase of a home. The balance being paid off against you giving a commitment to surrender all your beer caps to the government, during another longer period of production and consumption, let us say thirty more years. At the end of that time the home becomes yours.

Used beer caps have thus become a valuable commodity in your society.

Now let us assume, those politicians who run everything in your country, are completely without scruples, and in order to obtain fancy entertainment, foreign travel and other favours; secretively and on the side, produce extra quantities of used beer bottle caps, over and above those needed to cap the entire output of the nation’s breweries, to hand to their friends in productive industry. In order to retain their power, at every subsequent election, they also promise their voters some small portion of this extra bottle cap production, while nevertheless denying that beer cap supply exceeds the total national beer bottle production.

Worse follows with the digital age as devious financial institutions, discover they can produce virtual beer bottle caps, many of which, are likewise returned to the politicians, so that they may remain in power and purchase whatever they need in order to keep secret the now widely excessive beer bottle cap production from the wider population.

As more and more virtual bottle caps are produced, the demand for them gets ever greater and greater, so that after thirty years, even the productive worker now believes his home is worth two, three, four or even five times the number of bottle caps he has actually invested.

When everybody knows that this has occurred, and deep inside accepts that used beer bottle caps are actually worthless, the politicians abandon pretence and openly commence beer cap production, as if there were no tomorrow. This is called Quantitative Easing!

So here is the riddle: What is the home of the productive worker actually worth?

My answer, will be posted on Ironies Too, (where this posting first appeared) in twenty-four hours!

5 comments for “QE explained–A riddle of beer bottle caps!

  1. Chuckles
    October 13, 2011 at 12:03 pm

    I think you left out the bit about insisting that all the vitual beerb bottle caps must be replaced with real ones from the new production, or confiscated from the population?

  2. October 13, 2011 at 12:08 pm

    “So here is the riddle: What is the home of the productive worker actually worth?”

    It is worth exactly as much as another person is willing to pay for it.

    • October 13, 2011 at 1:33 pm

      Exactly so Bucko, but that does not answer the riddle when the value of the units being used to effect the purchase have been so constantly and radically devalued that it has become impossible to accurately evaluate their worth, except for one small split second of time.

      My own answer has now been posted to Ironies Too and can be found from the link below, please let me know if you disagree or have trouble reaching the link, in which case I will re-post the reply on this comment thread:

      http://ironiestoo.blogspot.com/2011/10/used-beer-bottle-caps-s-and-s-made.html

      • October 13, 2011 at 3:07 pm

        I’ve just been to read the link.
        Agreed about the devaluing of currency when not based on something set like the gold standard (Have I got that right?)
        I suppose the value of the notes and coins you hold in your hand is decided by what you can do with them.
        Lets assume one hours work is worth a meal. If you get paid a pound for one hours work and a meal costs a pound then it works. If the currency has be so devalued that the cost of a meal has risen to a million pounds, does that really affect you if you get paid a million pounds for one hours work.

        It’s not the actual value of the currency that matters. Its the effort required to get it compared with what you can buy with it.

        The problem comes when prices rise faster than earning power. That’s when the value of money decreases.

        At least that’s how I kind of understand it in my head. I may be talking crap 🙂

  3. October 13, 2011 at 2:55 pm

    What is the home of the productive worker actually worth?

    As always, it is worth exactly what someone else is prepared to pay for it.

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