Economic theory by Ronald
Economics and Moonshine Whiskey
The fallacy of banks and nations buying and trading national debt was anticipated by Mark Twain well over a century ago:
In Twain’s story (from Huckleberry Finn) two half-wit drunks hatched a plan to make money from a jug of moonshine whisky. The plan was to sell the whiskey by the single shot.
These enterprising capitalists had a half-dollar between them. As the day went along and passed into the night, the single half-dollar passed again and again from one drunk’s pocket to the other’s pocket, as they’d bought whiskey shots from each other until their moonshine was exhausted. Badly inebriated, when the time came to tally their earnings from whiskey sales, there was a single half-dollar proceeds in total, and each became convinced the other had robbed him.
This is precisely the principle behind trading debt. The attending bubble created is the misapprehension of reality identical to the Twain drunken characters’ belief they should have seen a profit, but the value of the half-dollar never grows in reality. It’s like economic fracking, as many BTU’s of energy are put into developing the energy source as you can pull out out of the ground, in a race to stay ahead of the curve. The only thing that really happens is, the whiskey jug (taxpayer resources servicing the debt’s interest) is emptied and there will be a hangover and severe resulting illness; at some point a fatal case of cirrhosis.
21 December 2016 update:
“The two new reports find that US forecasts of [shale] oil and gas abundance are over-hyped, unrealistic, and ignore mounting evidence of an industry in decline”