Our Economy in a Nutshell.

I found this article on another blog, and it was so awesome I just had to re-post. Thanks to Kevin Nguyen and The Bygone Bureau.

The Financial Crisis, as Explained to My Fourteen-Year-Old Sister

by Kevin Nguyen on October 1, 2008

Economist Kevin Nguyen explains the country’s economic woes to his younger sister, using Pokémon as an analogy. Seriously.

The following is an actual conversation I had with my younger sister, Olivia. She likes to draw, play World of Warcraft, and now, she’s the only fourteen-year-old girl who understands the U.S. economic crisis.

Kevin: Have you been following the news?

Olivia: Yeah, I don’t really get it.

Kevin: Imagine that I let you borrow $50, but in exchange for my generosity, you promise to pay me back the $50 with an extra $10 in interest. To make sure you pay me back, I take your Charizard Pokémon card as collateral.

Olivia: Kevin, I don’t play Pokémon anymore.

Kevin: I’m getting to that. Let’s say that the Charizard is worth $50, so in case you decide to not return my money, at least I’ll have something that’s worth what I loaned out.

Olivia: Okay.

Kevin: But one day, people realize that Pokémon is stupid and everyone decides that the cards are overvalued. That’s right—everybody turned twelve on the same day! Now your Charizard is only worth, say, $25.

Olivia: Uh-huh.

Kevin: At the same time, you’re having trouble paying back the $60 you owe me. So what would you rather do: try and pay me back the $60 or just default and give me your $25 Charizard?

Olivia: I’d give you the Charizard.

Kevin: Exactly. Who wouldn’t? Now, the bank—I mean me—has lost $25 when I expected to make $10. What’s the lesson here?

Olivia: Pokémon is dumb.

Kevin: True, but keep going.

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