Mom and Dad Normal learn bout the debt ceiling

This is what wampum looks like.

This is what wampum looks like.

Mom and Dad Normal are having budget problems.  Dad says their monthly credit card bill – the one they pay off fully each month – has doubled in the last five years. They put food, gas for their cars, haircuts, clothes, household items, and entertainment on that card.  Mom says they aren’t buying any more or less than they bought five years ago.  Has inflation been twenty percent a year for the last five years, Dad says?

Their 25-year-old son, Abe, comes up from the basement where he’s been living since he graduated from college. He says, “I saw a tv show about that.  It’s called Quantitative Easing.”

“Quantitative Easing?” says Mom.  “What’s that?”

Sue B. Normal, their school teacher daughter, says “Oh, that’s the word the Federal Reserve uses to mean inflation, because they can’t call it inflation any more.  If they called it inflation, they’d have to raise payments on Social Security checks to match it.”

Dad Normal lays down his Wall Street Journal.  “What are you talking about?” he asks Sue.

And so Sue B. Normal explains to Mom and Dad what money is. And here’s the conversation:

____________________

Where Bankers Come From, by Sue B. Normal

In the beginning of the world, people exchanged favors to help each other out. But as societies got bigger, and people developed desires to have more things, primitive tribes came up with the idea to pick something of value to use as a measurement of trade. In some lands, a rock of a certain size or shape became the designated measuring value.  In Native America, some tribes used “wampum.” Wampum was a set of beads, in strings of varying lengths. The point of wampum was to assign units of value, so that people could make trades of goods and skills that would make everyone feel they had traded fairly and equitably.  It was a measurement system for value.  People like to think trades are fair, and so it made everybody happy when the Wampum System was invented. While every tribe and nation developed its own scale for measuring value, most nations ultimately set up a system of money, so that the bartering of labor and goods could be perceived to be equitable.

When one person in the tribe had a lot to offer, in terms of skills, that person may end up with a BIG pile of wampum.  If they already had everything they needed, they might not have anything to spend their wampum on.  They might be too busy collecting more wampum, by giving out their services, for example.  So that person would have a pile of wampum sitting in their teepee. Teepees are small, and they don’t have locks on the doors, but nobody in Native American society ever stole the wampum. It would be disgraceful.  However, while theft was socially unacceptable, somebody in the tribe would often come to a Wampum Maker and ask to borrow.

“I will gladly pay you back on Tuesday, for a loan of wampum today,” they would say. The Wampum Makers always said yes, because that was polite.

Over time, the Wampum Makers noticed that their piles of wampum were getting smaller, because all the people who borrowed the wampum, never paid it back.

Eventually the Wampum Maker would seek out another member of the tribe, and ask that person to take care of their wampum for them, by burying it along the side of the river bank. These people were called Bankers. Banking would be an important service, because the Wampum Maker was too busy performing more important services. He didn’t have time to safeguard his old wampum while he was busy getting new wampum. So the Bankers and the Wampum Makers formed a pact. The Wampum Makers would loan all their money to the Bankers, and the Bankers promised to keep it safe and return it whenever the Wampum Makers asked for it.

In any society, there are some members who don’t have much skill to give as barter.  These people may be old, infirm, or terminally stupid. Or, they may be members of the military, and therefore not available to perform services within the tribe because they are busy fighting enemies.  So these people would go to the Tribal Chief, and say, “Can you give us some wampum, because we don’t have any?”

The Tribal Chief would look around the tribe, and see who had extra wampum.  He would go to that person and say, “Can you give some wampum to these poor people? And also, can you give wampum to me, so I can pay my Brave Warriors?”

The Wampum Maker remembered what happened when he loaned wampum to people before. He knew if he gave it away, he would soon have none left for himself.  So he would say: “I would, but I can’t, because I gave it to the Banker and he hid it.”

Then the Tribal Chief would go to the Banker.  “Banker, can you give me, and also these poor people, some wampum?”

The  Banker would say: “How much will you pay me to do it?”

Then the Chief would say, “I will give you back your original wampum, plus 10% more, but I will need some time to pay.”

The Banker, realizing that he can give the original rich man all of his wampum back, plus skim 5% off for himself and 5% more for the Wampum Maker says to the Chief, “Okay, I’ll give you some money.”

And this is the Bottom Line of the relationship between the Federal Reserve (the Banker), the President of the United States (the Tribal Chief), the elite class of the 0.1% (the Wampum Makers), and the rest of the people in the World.

Next Post:  Mom and Dad Normal Learn How the Federal Reserve Works

Image courtesy of http://www.freeimages.co.uk

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One comment

  1. Read somewhere that the early colonists used the blacksmith as their bankers.
    Look forward to the next installment.

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