Tuesday, January 20, 2009

Lets Review

From Dr. Helen comes this article in Forbes about the great college bubble of '09. For those with difficulty in economics... allow me to explain.

Imagine a busy intersection - cars zooming by day and night, zoom, zoom, zoom. On each corner of this intersection is a gas station, each selling gas for a dollar a gallon (bear with me it's just an example). One day, one of the gas station men thinks to himself, "Hmmm, if I charge two dollars a gallon for my gas, I'll double my profits. I better hurry and change my sign before those other guys think of it. Hoo boy, I'm gonna be rolling in it!"

Do you think the gas station man really doubled his profits?

Of course not - everybody just went to his competitors to buy their gas.

But then the gas station men got another idea. They said to themselves, "We would sell a lot more gas if we could convince the suckers, err... consumers, that our gas is the key to a better life, and without our gas, their lives will be empty and miserable."

So they hired a pretty girl to sit in a fancy car and say to the men, "I will like you if you will buy gas for my car." And they hired a stern girl in a sensible car to say to the women, "You can be independent like me if you buy your own gas for your car."

And behold, the suckers, err... consumers bought it and believed that in order to get the life they wanted, they must have the success gas.

But there was a cloud on the horizon. Many people who wanted the success gas could not afford it, or really didn't want to do the work needed to earn the money for it, or just felt the success gas was something they were entitled to, so they whined to their congressmen for something to be done.

And the congressmen heard the whines of the suckers, err... consumers, and set up a gas loan program whereby the suckers, err... consumers could get loans from friendly loan men who wanted nothing so much as to help the suckers, err... consumers tap into the supply of success gas.

The gas station men were ecstatic, because now they could charge as much for gas as they wanted since the suckers, err consumers would just get a loan from the friendly loan man to cover the increase.

But there was another problem, even though some of the gas buyers actually used the gas to get somewhere, most of them simply filled up their cars and drove around in circles - never really going anywhere or doing anything. So when the friendly loan men asked for their money back, the suckers, err... consumers didn't have any to give.

Then the friendly loan men stopped being friendly and told the suckers, err... consumers to pay up, or else.

And the suckers, err... consumers whined to their congressmen saying, "We were lied to; the success gas didn't bring us the success we were entitled to, and now we owe a lot of money to the friendly loan men, but cannot pay - you have to do something."

And the congressmen said, "We feel your pain, and it is unfair that you should be burdened with these debts, so we will start a program....

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