Squanderville Or Thriftville, Which Island Are You On?

Common Sense Commentary:  Credit for this goes to my son, Ron, a thrifty, generous, retired, DFW air controller and full-time Christian. He lives next door to his mom and dad ... and we study him and wife Cindy that we might learn to be better neighbors. They have goats, chickens, garden and grandchildren, and share everything, including this... Such a simple illustration of a Universal truth. RB

Squanderville From Kirby Anderson

 

 

Whenever I speak on the subject of economics, I almost always

tell the story of Thriftville and Squanderville. Let me give due

credit to Warren Buffett who first told the story of two side-by-side

islands of equal size: Thriftville and Squanderville.

On these islands, land is a capital asset. At first, the people on

both islands are at a subsistence level and work eight hours a day

to meet their needs. But the Thrifts realize that if they work harder

and longer, they can produce a surplus of goods they can trade

with the Squanders. So the Thirfts decide to do some serious

saving and investing and begin to work 16 hours a day. They begin

exporting to Squanderville.

The people of Squanderville like the idea of working less. They can

begin to live their lives free from toil. So they willingly trade for

these goods with “Squanderbonds” that are denominated in

“Squanderbucks.” Over time, the citizens of Thriftville accumulate

lots of Squanderbonds. Some of the pundits in Squanderville see

trouble. They foresee that the Squanders will now have to put in

double time to eat and pay off their debt.

At about the same time, the citizens of Thriftville begin to get

nervous and wonder if the Squanders will make good on their

Squanderbonds (which are essentially IOUs). So the Thrifts start

selling their Squanderbonds for Squanderbucks. Then they use

the Squanderbucks to buy Squanderville land. Eventually the

Thrifts own all of Squanderville.

Now the citizens of Squanderville must pay rent to live on the land

which is owned by the Thrifts. The Squanders feel like they have

been colonized by purchase rather than conquest. And they also

face a horrible set of circumstances. They now must not only work

eight hours in order to eat, but they must work additional hours to

service the debt and pay Thriftville rent on the land they sold to

them.

Sound familiar? It should. In many ways, Squanderville is America