When I think about the economy it reminds me a train. We all sit in there and enjoy produce-consume cycle that moves the train forward. When economy is healthy it grows and we feel as if the train accelerates making the ride more joyful. But occasionally something goes wrong; within months we fell in recession and the train slows down. How could it happen? We need fuel to make it move — we need money; we borrow more than we can return, we play in Ponzi schemes and do other crazy things. Eventually, they grow over a threshold and burst; you can’t borrow above some limit, people loose trust in your enterprise.

Economy, as a train, may be pulled or pushed. Consumers pull the economy by purchasing goods and services while producers and banks push the economy by making these goods and giving credits. When pulling force slows down the government eases life for manufacturers and banks thus increasing the pushing force. And vice versa then manufacturers and banks break, the government stimulates consumers to increase their pulling force in hope that the pushing force will recover. But what if they break at the same time? That’s what happening in 2009…

The whole idea of the stimulus package is to take fuel for the train somewhere and keep it running in hope that money could be returned later. But you know, this plan may fail. If there are severe problems with the train, if people that travel in it just can’t produce more then they consume — the train will stop. So maybe instead of burning more fuel it makes sense to just slow down? By lowering ambitions, consuming less and working more it is quite possible to live and enjoy the life. By ignoring the problems it is easy to blow up the engine and stop forever; how do you think ancient civilizations did stop to exist?

Advertisements