The Trombone of Economic Meltdown.

Imagine you see a trombone in a shop window priced £100. It could be a trombone or a strimmer I don’t mind, I’m just not restricting it to musical instruments, or for that matter garden equipment. Lets just say it’s a trombone. But you don’t have £100 so you borrow it off me. As it happens I’m also strapped for cash and lending you the money has zeroed my account so I borrow £100 to tide me over. My good friend lends me the hundred but finds he needs it to pay the builder for his house extension. Being a nice builder he relents and loans him the £100 in loo of what my friend owes him. The builder then finds he’s £100 short of paying for the materials for his next job. You can see where I’m going with this. Anyway there’s no problem because if all else fails you could sell the trombone, pay me back, I’d pay my friend, he’d pay the builder and the builder would pay for the materials thus saving the builders merchant from bankruptcy. BUT what if the trombone was run over by an articulated lorry on the A47 near Newark? You couldn’t pay me, I couldn’t pay etc etc etc. There’s not just the £100 debt you owe me. I owe £100, my friend owes £100, the builder owes £100 and so on. The builders merchant’s declared bankrupt because the trombone of someone he’s never met was squashed on the A47. So how much debt is in the system, a hundred pounds or six hundred? Now if a falling domino produces 1 joule of energy say then a row of a hundred will produce overall 100 joules but the last will fall with 1 joule, the same as the first. That’s very different from say a hundred story building obviously being a hundred times taller than a single story. If one took this additive approach with a million dominoes one would expect the cumulative effect to give rise to a medium sized tsunami but they don’t. They just go topple topple topple. So when we’re X billion pounds in debt is it really X billion or a £100 debt passed on Y million times? In other words, “Which careless bastard allowed his trombone to get run over on the A47 and got us into this mess?”