Steve Keen – “What is Money and Where Does it Come From?”

A long, but fun read for the weekend. Do enjoy!

Final script & first sketches for Chapter One of “What is Money and Where Does it Come From?”


This is the final version of the script for the first chapter of “What is Money and Where Does it Come From?” It’s been edited in response to some feedback from Patrons. I’ve also added a “Multiverse” first scene so that I can explore several popular fallacies about money with one starting point, and also play with the characters a bit in future chapters… And because it’s fun to pay tribute to Dr Strangelove.

I’ve included some of Miguel’s initial character sketches as well

Steve Keen is Distinguished Research Fellow, Institute for Strategy, Resilience & Security (ISRS) at UCL

Cross-posted from Steve Keen’s Website Rebuilding Macroeconomics

Scene 0, Earth One, Year Minus One: A Mad Scientist’s Lab

Dr Strangle:    Gentlemen. I vish to show you something magical: thanks to your generous funding of my quantum computing research, I haf created ze world’s—no, ze Universe’s—nein, ze Multiverse’s! first ever quantum communication system!

Dick:    That’s great Dr Strangle… So how does it differ from a, you know, a cellular phone?

Dr Strangle:    Ha! Those pathetic devices, supposed to be used to communicate ideas, and instead used to share pictures of Brittney Spears. All zey let you do is browse ze intellectual refuse of zis planet, or speak to other stupid persons on it. My Quantiverse©™ Phonebooth lets you speak to YOURSELF across multiple universes!

Tom:    What? You mean there’s more than one of me?

Dr Strangle:    Yes, unfor… Um, yes, zere are millions of you, on millions of world’s, all of which differ from zis world in tiny but consequential ways. On another world, you might be a woman, or Black, or poor…

Harry:    I could handle the first two, but not the third… And you’re saying we can speak to another instance of ourselves, on another planet?

Dr Strangle:    Vell, perhaps in version 2.0. But for now, when you speak, what you say occurs as a thought in the minds of every instance of you on every Earth in ze Multiverse—and zat’s a lot of Earths! And everyone who hears it will think what they hear is his own thought!

Dick:    My God. You mean, I could say something, and every other Dick in the—the what, the Multiverse?—would think it was their own thought? That… That’s brilliant! Guys! Think about it: remember those experiments we always wanted to do to show how the monetary system should be run? With this device, we can run them all simultaneously, and then pool the results!

Tom:    What if all three of us said the same thing at once? Like, for example, “I want to show how our monetary system is bad: governments that promise to run surpluses and then don’t do it; fractional reserve banks; banking itself, when people should rely just on their own money? I’m going to run an experiment that shows how money should really work. I’m going to use my wealth to create a country—let’s say TomDickHaria—where money is done right from day one.”

Dr Strangle:    Vell yes, but you can’t be so specific. Each you on another Earth vill think of a different aspect of ze problem…

Harry:    In fact, if I understand quantum computing correctly Dr Strangle, we should just focus on one aspect of money ourselves, and let the other Toms, Dicks and Harrys choose other aspects?

Dr Strangle:    Zat is right, Herr Harry! Ze magic of the Quantiverse©™ Quantum Multiverse Communications System is zat each trio of Tom, Dick & Harry will carry out a different experiment. You can then pool your newfound knowledge at the end of all zese different simultaneous experiments!

Dick:    This is truly brilliant Dr Strangle! Gentlemen, you know we all complain about the monetary system? Well here’s our chance to do more than complain: we can create a multitude of experiments simultaneously! Let’s use this Quantiverse thing to get our counterparts to expose all the weaknesses of the monetary system, all at once!

Harry:    Love the idea Dick, but we’d better get the script right. Give us a few minutes Dr Strangle.

Dr Strangle:    Certainly gentlemen. I have all the time on all ze worlds in ze Multiverse.

Tom:    Ah Dr Strangle, if there are multiple me’s, then there are multiple you’s too, correct? How do you know some of them haven’t already made a Quantiverse?

Dr Strangle:    Elementary my dear Tom. Because I have. I’m the Dr Strangle that succeeded, the others have all failed—so far.

[A few minutes later, Tom Dick and Harry hop into the Quantiverse booth, and say in unison]

“I am going to create a mini-country with my two best friends, where the money system is done right. We’ll fix one thing that’s wrong with the current system, and show how much better the economy works as a result.”

Dick, to Strangle:    So that’s it? What do we do now?

Strangle:    Easy. You just choose one thing to change, and do it. Trust that some Tom, Dick and Harry on some Earth elsewhere in ze Multiverse will change one different thing.

Tom:    But how will we know what they found in their experiments?

Strangle:    Ah, zank you for asking. Let me show you the budget for my Quantiverse©™ Séance machine…

Dick:    We’ll pay it, Dr Strangle. Now gentlemen, as the Earth on which this experiment originated, let’s go for the purest of all systems: a world that reproduces our hero Milton Friedman’s hypothetical world from the Optimum Quantity of Money (Friedman 1969). There’s a fixed amount of money, no banks, no lending, and no government. Let’s do this!

Scene 1, Earth One, Year 1: A recording studio

Hi! I’m Tom.

I’m Dick.

And I’m Harry.

Dick:     We are three, law abiding, liberty loving Americans who have had it up to here with the America of today.

Tom:     We are so sick of politicians who won’t keep their promises.

Dick:    And governments that won’t balance their books.

Harry:     Every election, some politician promises to get the government’s house in order. Every year, they fail. Look at this: the Whitehouse has kept a record of its surplus since 1901. And what does it show?

Tom:     Failure!

Dick:     They all say they’re going to run a surplus: almost all of them fail. The average “surplus” since 1901 is minus 2.5% of GDP!

Tom, off script:     Err, Dick, what about the Wars though? Shouldn’t we leave them out?

Harry:     Ha! Even if we do, the deficit is still 1.85% of GDP.

Dick:     Some “Surplus”! Ha! They should be honest and call it a deficit! Turn it upside down and you’ll see the truth.

Dick:     You see? Irresponsible! Promise a surplus, deliver a deficit! It’s criminal.

Tom:     Shame! Shame!

Dick:     And Trump! What a disappointment! He criticized Ryan for not balancing the budget…

Harry:     When he wasn’t even President!

Tom:     That’s right, when he wasn’t even President!

Dick:     And yet when he gets the #1 job, what does he do? Can’t even get to the average deficit, even excluding wars! He’s running a deficit of over 4% of GDP!

Tom, off-script:     Ah, Dick, Clinton did pretty well though, didn’t he? He managed a 2% of GDP surplus! Maybe we shoulda voted for [whack!]

Tom:     Sorry Dick, I don’t know what came over me!

Dick:     Maybe it’s your mutual love of cigars? Anyway, back to business: we’ve had enough!

Harry:     That’s right: we’ve had enough of governments promising to save money, to put some aside for a rainy day, and not doing it.

Tom:     So, we’ve decided to form our own country.

Dick:     And do it right, from day one! We’re sick of governments running up debt, so…

[spin out to three worlds here, where in each world, Tom, Dick and Harry try a different Neoliberal fantasy about money…]

Chapter 1, Earth One: we’re not gonna allow debt, and we’re not going to have a government!

All 3, to camera:     We hereby declare ourselves to be citizens of TomDickHaria™©. TomDickHaria is a self-sufficient country located about here (x covers half of the Midwest). We have no government but! And no welfare! And no taxes either! We are a pure, free enterprise nation. And we want our story to be an inspiration to more of you to break away, form your own free countries. So here it is. We’ll lay it down as it happens, so you can all learn from our quest for freedom…

Giles [Camera Man, interrupting the filming]: But how you gonna do that? The United States government won’t let you!

Dick:     You just right on shooting sonny boy, and let us big boys worry about the details…

Harry [conspiratorially]: You see, we ain’t dumb. We’ve incorporated TomDickHaria™© in the Cayman Islands: it’s a company, not a country.

Giles: But what about all the other businesses here? What about my business? I’m not part of “TomDickHaria”!

Dick:     Oh yes you are sonny. You see, we’re not poor either. I’ve made a little money out of oil.

Harry:     And I’ve made some out of “accounting”. People pay me real good to cook their books.

Tom:     I just inherited lots of land from ma Daddy. But really, really lots of land.

Dick:     We bought your business, and every other business in TomDickHaria™©. You can keep on running it just fine, and pay yourself a nice management fee, but you’re a subsidiary of ours.

Giles:     I’m what?

Tom:     A subsidiary of mine. We bought the bank, I paid off all your debts, and I got your business in return.

Dick:     Just so that, you know, you’d have to come along with us for the ride. You’re debt free, but we own you. Sort of, anyway. And everybody else in TomDickHaria™©.

Giles: What? Oh My God this is insane! And you guys can evade your US taxes, but I’ll have to pay them!

Rita [Giles’ sound recordist]:     And so will your staff.

Dick:     No you won’t, because we’re not going to pay you in US dollars. You’re going to get Miltons instead. And your wages will be in Miltons too. The US doesn’t tax Miltons.

Giles & Rita in unison:    “Miltons”? What the hell are “Miltons”?

Harry:     They’re our own currency. See? [Holds up a M1 bill [go to town here mate. I’m thinking of a note with a scene involving helicopters flying over the land, Milton Friedman’s face on the note rather than Lincoln, maybe Ayn Rand in there somewhere…]

Giles:    Your own currency? What, you expect me to accept payment in your bloody IOUs, rather than Uncle Sam’s Greenbacks?

Dick:     Did I mention we were rich? We’ve put 300 billion greenbacks into a little account in the Cayman Islands to back the Miltons, just in case. But in TomDickHaria™©, all payments will be in Miltons. You can use your Miltons to buy anything else you want produced in TomDickHaria™©. We’ll maintain parity to the dollar: one Milton will always be worth one 2020 United States dollar. But hell, it’ll be worth a lot more than a US dollar in 2030! With the trillion-dollar deficit Trump is running, hyperinflation will start in Uncle Sam’s currency any day now!

Tom:     Errr, but Dick, inflation has been fall… [whack]

Tom (a bit shaken but still going):     It’s fallen even as the deficit has risen. Look—they don’t seem to move togeth… [whack!]

Dick:     Mere detail. “Long and variable lags” (Friedman 1961, p. 464). It’ll happen to Uncle Sam, but not to us: the supply of Miltons is fixed. There’s 300 billion of them, and that’s it. Just as we agreed, OK Tom?

Tom:     Yes Dick. 100 billion for each of us.

Giles:    Each of you? What about me?

Harry:     Your fee for shooting this video was $2,000, wasn’t it? Then we’ll pay your firm…

Dick:     Tom’s subsidiary.

Harry:     That’s right. Tom’s subsidiary; we’ll pay you M2,000 instead. Do you want them physical, or in the electronic account we’ve set up for you?

Giles: I WANT DOLLARS, not “Miltons”! What fucking use are those things to me?

Dick:     They’re accepted everywhere in TomDickHaria™©. You can buy just what you like with them here, and one day, they’ll be worth a lot more than a US dollar. You’ll see. So, what’ll it be sunshine: physical or electronic?

[Giles goes to object, but shadowy figures who are Dick’s henchmen start to move towards him. He realises he has no choice.]

Giles:    Physical funny money or electronic… I don’t know which is worse… I’ll take the physical. At least that way I’ll have proof when I go to my lawyer to sue you!

Dick:     Your lawyer? You mean, Harry’s law firm?

Harry, smirking: It makes sense for the accountant to own the lawyer, don’t you think?

Dick:     Now piss off and edit this thing for broadcast. Me and the boys have some planning to do…

Tom Dick and Harry exit the studio, along with Dick’s henchmen.

Giles and Rita stand in shock. Giles gives Rita M250 as TDH leave. “What good are these bloody things? I signed up for 250 bucks a day, not 250 Miltons”. “I don’t know, but it’s all I’ve got. We’ll just have to see if this mad scheme works.”

Dick, walking along the street:    Now boys, we got some work to do. What’s the state of the books, Harry?

Harry:     Come to my office boys. Got some things to show you.

Scene 2, Earth One: Start of Year One

Harry’s [large] accounting firm. TDH are sitting in a boardroom, looking at a large LCD screen.

Harry:     So, here are our consolidated accounts. We divided things up real good: we each own capital worth a hundred billion dollars…

Dick:     Miltons!

Harry:     Last year we were still using dollars, remember? So we were worth 100 billion dollars each last year, we each had a turnover of $100 billion, and we each made a profit of $10 billion.


Dick:     But what?

Harry:     Well, when I look at what I buy from you, and what you buy from me, we all break even. Look:

Dick:     What?! But you just told again that me I made a $10 billion profit last year. And you did; and Tom did. What’s going on—[menacingly] you’re not cooking my personal books, are you? I don’t care if what you show the Feds is a fantasy, so long as they can’t prove it; but I want what I see to be squeaky clean—and profitable!

Harry:     It is Dick, and you are! But … I don’t know… I just don’t understand that table.

Dick:     Well I do: we’re not saving enough money! We founded TomDickHaria to show we can do better than the US government. Well we’re not running up any debt…

Tom:     Yeah, we agreed, no debt—private or public!

Dick:     That’s right! Bring up that total debt graph Harry. Right, look at that! Does that say “Failed State to you, or what?”. That’s not gonna happen in TomDickHaria, understood?

Harry and Tom:     Understood

Dick:     Right. So, starting today, I want us all to pledge that every year, we’ll save 10% of our income. Agreed?

Tom:     Um, Dick… Remember “long and variable lags”?

Dick:     What about it?

Tom:     Well, we’ve only just started. We haven’t even told everybody that the greenback is banned. Hell, we haven’t even told anyone else that TomDickHaria exists yet! Maybe we should give people time to get used to the new system.

Dick:     No! We’re going cold turkey on loose money from day one!

Harry:     Tom’s right Dick. Your doctor told you that you had to lose weight, right? And you said you’d train up to be able to do a Marathon, right? You said you’d take two years to get there, right? Well, what if your doctor forced you to run a Marathon today? We’d be at your funeral tomorrow.

[Deflated Dick]

Tom:     Let’s give people two years to get used to the Milton Dick.

Dick:     OK, OK, OK. Here’s a deal: I said I’d do the Silver City Marathon in two years’ time. And. I. Will. The day after, we all start saving 10% of our income, every year. Agreed?

Tom and Harry:     Yes Dick.

Scene 3, Earth One: Year Two

Giles puts Tom, Dick and Harry’s announcement out across all broadcast and social media. It includes an announcement from President Ivanka Trump, who is a personal friend of Dick’s, that the US Government is interested in seeing how the experiment turns out, and won’t intervene. The population starts in shock, and no-one really trusts the Milton except Tom, Dick and Harry. But everyone is suddenly also debt-free, so everyone starts to spend more freely in this funny money. To everyone’s amazement (except Tom, Dick and Harry), the economy picks up. As the Silver City Marathon approaches two years later, even though there are only 300 billion Miltons in existence, the GDP of TomDickHaria comes in at 600 billion Miltons.

Tom, Dick & Harry are heroes, and the population cheers Dick on as he crosses the Silver City Marathon finish line after five hours. Giles and his crew of three—sound recorder Rita, lighting engineer Sol, and makeup artist Joan—record an exhausted but triumphant Dick at the end.

Dick:     I want [wheeze] to thank all you TomDickHarians for your support! I’ve shown that a fat old geezer can turn his life around, and we’ve shown that a debt-free, government-free money can work. Tomorrow, we go one step further: Tom and Harry and I have pledged that, from now on, we’ll save 10% of our income. We’re gonna have so much savings, we’re gonna turn TomDickHaria into the richest country on Earth!

The crowd and Harry and Tom cheer Dick on, but Harry remains puzzled by the fact that, despite GDP doubling over the last two years, none of them have managed to save any money.

Scene Earth One: Year Three

The Category 6 cyclone Donald hits Florida, destroying Miami, and turning Mar a Lago into More a Lagoon. Donald is downgraded to a Category 4 by the time it hits inland TomDickHaria, but it does extensive damage to Tom’s farming operations and Dick’s factories. Harry’s insurance company has to pay out to them both, but that doesn’t compensate Tom for the fall in his sales. Dick manages to meet his sales targets by machinery sales to Tom from inventory. To add insult to injury, Harry is run ragged fighting insurance claims. At the end of the year, exhausted, he sits down to check the state of TomDickHaria’s finances—and gets the shock of his life.

Dick has outdone his ambition to save 10% of his income, and in fact has saved 15%, or M30 billion. But Harry, Harry has dis-saved: his account has fallen by precisely as much as Dick’s has risen. He’s stunned. He can’t believe the figures. He pores over their accounts, making sure—unfortunately—that there are no mistakes. He gives up, goes to the ‘loo, sits down and thinks to himself: “I’m lost in that bloody matrix”.

Matrix thought bubble. Neo. A spoon…

SPOON BOY (SKINNY BOY) Do not try to bend the spoon. That is impossible. Instead, only try to realize the truth.

NEO What truth?

SPOON BOY That there is no spoon.

Harry:     “There are no savings!” [He exclaims, as he jumps off the toilet with his trousers still around his ankles. Harry composes himself, pours a scotch, sits back in his armchair and says out loud] “And now I’ve got to explain that to Dick”.

Scene 4, Earth One: Year Three, Harry’s Office

Harry:     Boys, take a chair. Time to go over the year’s accounts. First of all, Dick, congratulations: your goal was to save 10% of your income, but you actually saved 15%: M30 billion!

Tom, to a smirking Dick:     Congratulations, big boy. How’d I do, Harry?

Harry:    You just broke even Tom

Tom:    Ah. Dang. Well, I suppose it’s better than going backwards, isn’t it fellas?

Harry:    Better than you realize

Tom:    So how did you do, Harry?

Harry:    I lost M30 billion.

Tom and Dick in unison:    What?!! How’d that happen Harry?

Harry:    Because you stole it from me, Dick.

Dick, puzzled and angry all at once:    I did no such thing!

Harry:    Not knowingly, no. But you did. Your savings caused by loss—my “dis-savings”.

Dick:    “Dis-savings”? What sort of a word is that?

Harry:    It’s one you’re going to have to learn the meaning of, Dick. You see, when you add us all together, “There are no savings”.

Dick:    What? What’s this “There are no savings” shit? You ain’t gone all Zen on me, have you Harry? You’re sounding like a monk.

Harry: Close, Dick, but an accounting monk. It’s a mathematical identity: your savings are our dis-savings. There’s only a fixed number of Miltons, remember? So if you have more, the rest of us have to have less. You saved 30 billion Miltons and they all came out of my pocket.

Dick, rising to his feet:    No-one calls me a thief! You’re just not man enough to cut back your spending like I did. Bugger you: I’m going to do it again. And I’ll start by cancelling my accounting contract with you, and doing it myself! Good day!

[Dick storms out of the room]

Harry sighs to himself:    Well that went well…

Tom (who’s been virtually ignored):    Ah, Harry, I didn’t understand it either. But I’m not angry like Dick. Can you try to explain it to me, one more time?

Harry:    Sure Tom. You remember that there’s only a fixed number of Miltons—300 billion of them?

Tom:    Sure. That’s the first thing we agreed. “Inflation is always and everywhere a monetary phenomenon”, as Milton Friedman taught us. So with no money growth, no inflation: TomDickHaria’s proudest achievement!

Harry: Yeah, but what that means is that, whatever each of us has in our accounts, the total has to be M300 billion. Agreed?

Tom (thinking for a second):    Yup, makes sense.

Harry:    So Dick’s account went up by M30 billion; yours didn’t change. Mine had to fall by M30 billion, so that the total remains at M300 billion. Dick’s savings caused me to dis-save by precisely as much.

Tom (sort of enlightened but also puzzled):    Hmmm. I can understand the arithmetic: if Dick’s account went up by M30 billion, and mine stayed the same, then yours has to go down by M30 billion, sure. But that’s just arithmetic: you said he “caused” your dis-savings. But how? That’s the bit I don’t get. And what do you mean, “There are no savings”? We’re all trying to save all the time, aren’t we? And don’t you need to have savings before you can have investment? We’re all investing—especially me after that storm—so there must be savings to finance them.

Harry sighs:    All good questions Tom. I don’t understand those things either. Not yet, anyway.

Scene 5, Earth One: Year 4

Harry tries to cut his spending further, but he’d done so much in TomDickHaria’s 3rd year that all he can manage to do is save himself a billion by using his own accounting firm rather than Harry’s. Harry, determined to prove a point, cuts back on all maintenance and equipment purchases and causes his demand for Harry’s machinery to plunge by 10 billion. Tom, still reeling from the floods, is unable to reduce his spending on either Dick or Harry.

It’s also been a tough year for the economy of TomDickHaria. Things are still far better than under the dollar, but GDP inexplicably slumps from M600 billion to M569 billion. The recession cuts Giles’ income by about 10%, and he copes by cutting his management fee and reducing Joan’s hours by 50%.

Harry does his own accounts, and Tom’s. Dick’s accountant does his. As Harry is explaining the accounts to Tom, a gloating Dick rings up via Skype, and Harry puts his call on the big screen.

Dick:    Hello ex-accountant, how’s it going? Don’t bother telling me, because I’m doing fine. I only managed to cut my spending by M1 billion, but somehow, I ended up saving M11 billion! How do you like them apples? And where do you reckon I “stole” them from?

Tom:    You stole them from me, Dick.

Dick:    What? Not you too Tom! What the hell do you mean?

Tom:    Dick, there’s only 300 billion Miltons. If you get more of them, they have to come out of my account or Harry’s. He “dis-saved” [illustrated by air quotes] 1 billion last year too, so while you “saved” M11 billion, Harry and I “dis-saved” precisely the same amount.

Dick:    What’s with this “dis-savings” nonsense, Tom? Have you forgotten why we established TomDickHaria too? We’re all about saving money!

Tom:    There are no savings Dick! Harry explained it to me last year, after you stormed out. The logic is…

Dick:    Ooh, big word, farm boy: “logic”. Screw you too! Neither of you have the balls to save like I have. You’re both losers! [The screen goes blank].

Harry:    Tom, are you OK? You don’t look right.

Tom:    I’ve copped this all my life Harry. Farm boy, rich man’s son, Daddy-made-billionaire. Normally behind my back, of course. Didn’t think Dick was one of those that did, but now I know… Well, we’ll see whose made of tougher stuff. Harry, I’m going to cut my spending on manufactures to the bone: let’s see how Dick “likes them apples”! Will you join me? I promise to keep my spending on your stuff constant if you do. You’re still my best friend, even after all this. [Harry nods]

Tom, as he leaves the room:    By the way Harry, you know the economy went backwards quite a bit last year: GDP was down by M31 billion. Do you have any idea why?

Harry: No old son, that’s still got me beat. But I’m working on it.

Scene 6, Earth One: Year 5

Demand for manufacturing plummets as both Harry and Tom put off all new equipment purchases and do the bare minimum of maintenance. Tom cuts his spending on Dick’s manufacturing businesses from M90 to M60 billion, while continuing to spend M100 billion on Harry’s services. Harry does likewise, cutting his purchases from Dick by M30 billion, but keeping his spending on Tom’s agricultural output constant. Inexplicably, the economy tanks badly as well, with GDP plunging to M499 billion. It’s still better than the last year with the dollar, but the plunge causes unemployment to rise, and it has everyone spooked.

When Dick does his accounts for the year, he’s both shocked and puzzled. Somehow, someone has stolen … Oh shit. When he calls Harry this year, he finds that Tom and Harry are more than prepared for the call.

Dick:    Hi fellas. Look, I have a problem here, and…

Harry:    We know, Dick. Your “savings” fell from M141 billion to M82 billion, a M59 billion plunge.

Dick: What? How did you know that? Have you got a spy at my accounting firm?

Tom:    No Dick, it’s simple accounting L.O.G.I.C. My account went up by M30 billion this year. Harry’s went up by M29 billion. Since the stock of Miltons is constant, that means your account had to fall by M59 billion.

[Silence; the penny finally drops on Dick]

Dick:    Holy shit. Then There are

Tom:     no savings, at the aggregate level. That’s right Dick. Individuals can save, societies—including TomDickHaria—cannot.

Dick:    Damn. So if we want to save more money, we have to somehow create more money? That goes against everything I learnt from Friedman.

Tom:    Maybe he didn’t know what he was talking about.

Dick:    I’d call that heresy, if I wasn’t staring at an account that’s 18 billion short of when we started, after I’ve spent three years trying to save money. But what happened to the money? We didn’t save any, but something hap…

SMASH! His sentence is interrupted as a stone thrown by a now unemployed Joan smashes his office window:    Screw you and your funny money experiment, you Dick!

Dick:    What the hell? Why the fuck did she do that?

Harry:    She’s unemployed Dick, and there’s no welfare, remember? She probably wants to be arrested and sent to the private jail you run. At least she’ll get fed.

Dick:    That’s another thing. Why has the economy slowed down so much? I thought savings was supposed to cause investment, not unemployment. This experiment is turning out to be a lot less fun than I expected.

[Tom, has been doodling noughts and crosses on his pad as he waits for Dick to come to grips with reality. To fight the boredom he lets X win one round, and draws a cross through the table…]

[Thought Bubble: the movie War Games. A child hacker accidentally sets The Pentagon’s WOPR supercomputer on a course to Global Thermonuclear War, until he teaches WOPR Noughts and Crosses. After playing a few hundred drawn games, it does the same with mock all-out nuclear war, and then makes the analogy:


WOPR: “Nuclear War is a strange game … the only winning move is not to play”]


Tom, excitedly:    The Savings War: the only winning move is not to play! Harry, that mystery matrix of yours: what’s the sum of the numbers on the diagonal? Hurry!

Harry, after fiddling with some Excel formulas:    Minus 489 billion Miltons. Why do you ask?

Tom:    What was TomDickHaria’s GDP this year?

Harry:    Four hundred and … eighty … nine billion Miltons. Oh God.

Tom:    And what was the sum back in before we started to try to save money?

Harry:    Minus M600 billion—exactly the same as GDP that year, only the opposite sign.

Dick, who’s now cottoned on:    And the sum of the other cells?

Harry:    M489 billion this year, M600 billion in Year Two. The same value as GDP, and the same sign.

Dick:    And the sum of the whole table is zero. Gentlemen, firstly, I apologize for being a dick for the last three years…

Harry:    Well if the name fits… But yeah, apology accepted. So, secondly?

Dick:    Secondly, I’ve worked out where we went wrong—or where we were misled by Milton. What you spend on me is your expenditure and my income at the same time. Ditto for what I spend on you guys. So while my expenditure and my income can differ, as they have for the last three years, our total expenditure IS our total income. That’s why There are no savings. I finally get it. Sorry that it’s taken me so long!

Harry:    No shit Sherlock. But I mean that as a compliment—you’ve explained something I hadn’t figured out yet. Wow. So, trying to save money doesn’t lead to investment; it doesn’t even save money! Instead it slows down the circulation of money, and directly reduces GDP, Milton for Milton. If you compare Year One to this year, we went from spending a total of M600 billion on each other, to spending M489 billion in total while trying to save M111 billion. And we saved ZERO, and GDP fell by precisely
M111 billion. Everyone loses in a “Global Savings War”.

Tom:    You’ve answered your “What happened to the money?” question too Dick. It didn’t go anywhere. It just slowed down. Our attempt to save money saved zero money in the aggregate, and reduced GDP instead. Isn’t that what Keynes called “the paradox of thrift”?

Dick:    So now we’re quoting Keynes?

Tom:    He’s starting to make a lot more sense than Friedman! Question is, what do we do, now that we’ve learnt that unexpected lesson?

Harry:    Simple: we spend more, on each other, deliberately!

Dick:    No! That’s irresponsible, it’s, it’s … Keynesian!

Tom:    Keynesian my arse: it’s sensible. I let my farms run down this year, trying to avoid spending money on you. Sorry, but as you said, you were a dick, so I treated you like one. But my farms have suffered. And hell, so has your business: you’ve got oodles of inventory rusting.

Harry:    You’ve even got a broken window to fix. Tom’s right Dick. It looks like it isn’t savings that leads to investment, but spending—somehow. If we all spend more, our expenditures go up, but so does our income. Our Miltons work harder by turning over more rapidly: we get more GDP from every Milton. So, let’s get back to spending M100 billion on each other each year.

Dick, in a funk:    OK, OK, OK. I get it. But what about my savings—I mean, I’m down M18 billion on where I was when we began this experiment. And you guys are up M18 billion? Is that fair?

Tom:    Well, we started this as an experiment to teach people about money Dick. We just didn’t realise that the people we’d be teaching would be ourselves. You’ve caught up now. But you started the savings war, and you were the last one to realise that we all lose. And, as you’ve always said, education should cost.

Dick:    I didn’t mean that it should cost me! But… OK, OK, I’m stuck. But… there’s still something I don’t understand. Harry, you told me at the beginning that I was—we all were—making profits. But your “Noughts and Crosses” table shows us in the aggregate spending exactly what we receive. That has to mean that we weren’t making profits, doesn’t it?

Harry:    That’s got me stumped too Dick. Maybe we need to speak to someone brighter than ourselves to understand it.

Tom:    You mean Dr Strangle? Hadn’t we better go see him anyway about his QuantumSeance machine? We’ve kept paying his bills every year, but we haven’t seen anything yet…

Scene 7, Earth One: End of Year 5

Tom:    Dr Strangle, we’re ready to communicate the results of our experiment, but there’s still one thing we don’t understand. Harry’s accounting showed us as each making $10 billion a year profits before the experiment, and as much as M20 billion a year before Harry started the Savings War.

But at the same time, when we look at what we spend on each other, it looks like there’s no profit in the aggregate. Our aggregate expenditure exactly equals our aggregate income—and we know now that this has to be true.

But that looks like we made zero profits—in fact, it looks like profits have to be zero! What’s going on???

Strangle, after checking the two tables for a few minutes:    Ah, gentlemen! You are doing something typical of Earthlings—and especially of economists. You are confusing stocks and flows. You know that the stock of Miltons in this TomDickHaria necessarily sums to 300 billion, so that’s all there can be. That’s the stock of Miltons, eternally fixed in your TomDickHaria. And you know that you’re each making M20 billion a year in profit—which is a flow of Miltons per year. And you think that you should each be able to add this annual flow to that stock… But you can’t. Adding “Miltons per year” to “Miltons” doesn’t make any sense.

Dick:    But then what happens to our profits?

Strangle:    Simple: you spend them, just like your managers like Giles spend zere management fees, unt zere workers like Rita spend zere wages. And you generous philanthropists spent most of your profits on me, so that I could develop the QuantumSeance machine. That spending of profits turns up in your “Noughts And Crosses” table, so ze table balances.

Tom:    Ah. I get it… I think. Profits in Miltons per year is not the same as accumulation of additional Miltons each year. If we want to accumulate more Miltons each year, then we have to create them each year. But we decided that our TomDickHaria would not create any more Miltons. So our Profits have been spent mainly on you, and by you, as you created the QuantumSeance machine! And you’re saying that the QuantumSeance machine exists now?

Strangle:    Yes! It is even more amazing zan ze Quantum Phonebooth! You sit around ze QuantumSeance Table, ask a question, and it is answered by all ze Tom unt Dicks Unt Harries who have carried out their experiments, on ze other worlds where they were rich enough to do it.

Dick:    Let’s do it then. Let’s hold that Quantum Séance. Maybe learning what happened on other worlds will make up for me losing M18 billion in profits—sorry, in accumulated wealth—here on Earth One…

Chapter 2, Earth Two: We’re going to have a government that runs a surplus every year!

All 3, to camera:     We hereby declare ourselves to be citizens of TomDickHariett™©. TomDickHariett is a self-sufficient country located about here (x covers half of the Midwest). Our government, unlike other governments, will practice what it preaches. We’re going to run a government surplus every year!

To be continued…


Friedman, M. (1961). “The Lag in Effect of Monetary Policy.” Journal of Political Economy
69(5): 447-466.

Friedman, M. (1969). The Optimum Quantity of Money. The Optimum Quantity of Money and Other Essays. Chicago, MacMillan: 1-50.

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