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News Link • Federal Reserve

Gilligan, The Skipper, and the Federal Reserve

• www.dailypaul.com

Imagine if life on the island were different. Instead of seven stranded castaways, there were only four: Gilligan, the Skipper, Mr. Howell, and Ben Bernanke.

Besides non-existent ratings without Ginger and Mary Ann, some other things would be different. Imagine that there was only one thing to buy on the island, coconuts. Now, of course, this takes a willing suspension of disbelief, because we know that these four people would need more than just coconuts to survive. They would need clothing and shelter and might want other comforts that the island might conceivably provide. They would all provide different services to each other and trade them for the services of their fellow castaways. But in this example, the only thing that they trade for are coconuts.

Mr. Howell owns the coconut orchard, which produces 100 coconuts per year. Mr. Bernanke is in charge of the currency, the Island Reserve Notes (IRNs). In order to purchase the only available product for sale on the island, one must use IRNs. Barter or the use of other commodities to make this purchase is prohibited. Each coconut costs 1 IRN.

Gilligan and the The Skipper each perform different services for each other and the other two which they trade for these paper notes in order to buy coconuts. At a given point in time, Gilligan and The Skipper each have 50 IRNs.

There are a few things that are true. The first is that the IRNs held by Gilligan and the Skipper have no value of their own. Their value is wholly derived from the coconuts that they can buy with the IRNs. Neither do the ISNs have any value off the island. Back in civilization, the currency is not recognized, although if a mainlander were to acquire some IRNs, he would be able to purchase coconuts with them if he ever found himself stranded on the island.

 

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