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01 February 2012

Behold, Mighty Oceanus!

The economy, more than anything, is just about moving resources around. When the economy is up, there is a lot of movement. When it is down, there is less movement. Paul Krugman has a neat metaphor to explain this using a babysitting co-op. I have a new one.

Think about the economy as an ocean. We tend to think of oceans as being static, but they actual move water around quite a bit. There are naturally occurring streams, tides, and currents that constantly churn. Part of what this movement of water does is to distribute heat around the globe. Because of the axial tilt of the earth, some places get warmer than others. The streams, tides, and currents distribute that heat around. Without it, waters would stagnate; some places would get too hot, others too cold.

Just like that mythical ocean, today, as the economy fails to move, some places are heating up (e.g. the growing coffers of most corporations and the pockets of the wealthiest of the wealthy) while others are growing cold (e.g. everyone else). If we follow this, than we have to get the water flowing again, and any arbitrary agitation will do the trick. That is why government stimulus (in sufficient quantities) works. Artificial influxes of money turn on the faucet (to strain the metaphor). Movement is good for everyone.

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