Once upon a time, long ago and far away in an erstwhile land called the Austro-Hungarian Empire, there was a little boy called Benjamin who lived with his widowed mother. They were very poor and one day, they found they had neither money nor food.
The widow cried, and the little boy went out into the woods, where he foraged for mushrooms and tried in vain to catch a rabbit. But he was little and it was winter and the animals had gone East where the job opportunities were better. Cold, hungry and miserable, he sat on a tree trunk and burst into tears.
There, an old woman found him: “What is the matter my child?” she asked, “Why are you crying?” “Because I’m tired, and cold and hungry.” replied the little boy. “I’m so hungry I can’t sleep, and I’m a failure.”
“Well that’s no good.” said the old woman. “I am your Fairy Godmother and it’s my job to look after you! Here is a natty scarf to keep you warm, an economic textbook to help you sleep and here is a special present”.
To his amazement, the old woman handed Ben a little old cooking pot. “When you are hungry, just say to the pot: ‘Cook, little pot, cook’ and it will cook up some very fine porridge. And when you want it to stop, you must say ‘Stop, little pot. Please stop’”.
With that the old woman left. The boy didn’t really believe what she had told him, but he gave it a try anyway. And indeed, when he told the pot to cook, it cooked (porridge) and when he asked it (nicely) to stop, it stopped. He filled his empty belly, went home, filled a bowl for his (very grateful) mother, and after reading the opening pages of The General Theory of Employment, Interest and Money, he fell to sleep.
For a while, everything was much better. The widow and her son had plenty to eat, and they were happy until one day, when the boy was out, his mother told the pot to cook, using the words she had heard her son speak.
“Cook, little pot, cook” she said. And it did. But she could not for the life of her remember what to say to make it stop, and soon there was porridge everywhere.
By the time Ben had returned from his long walk to the library where he had gone to borrow another economics book, the whole village was swimming in porridge.
It took ages for the townsfolk to clean the town and they turned in anger on the widow and her son. They told them to leave, and then they offered them some money to leave. Not a lot but just enough to pay for a ticket to America, and so the widow decided to seek her fortune in the land of opportunity on the other side of the Atlantic.
They didn’t take much with them, but Ben packed his textbooks and without saying a word to his mother, his little cooking pot.
For years, Ben didn’t use the pot. His mother found work as a teacher in a local school and they developed a fondness for many kinds of American food. Porridge isn’t as exciting as toasted marshmallows and peanut butter sandwiches. Ben took up the saxophone, and fell in love with economics. In due course, he was offered a place at Harvard, and though his mother was sad to see him leave, she was very proud that her little Hungarian boy was going to be a big cheese in his new country.
At Harvard, Ben occasionally used his pot to make sure he had plenty to eat, and saved up his money to go out with his friends. He joined a blues band with Al Verpont, and played football with Leroy, Mark and Mario, as well as many others. Ben was the worst footballer, a reasonable sax player (not as good as Al), but he was by far the best theoretical economist, because he had powers of imagination that the others simply did not possess.
Time passed. The friends got older, in some cases much richer and in other cases much more influential. But then, catastrophe struck. The banks went bust and the whole country ran out of money. And not only that, but like dominoes, the banks of countries around the world toppled over and there was no money anywhere.
The President of the United States called his closest advisors together and asked what should be done. Of course, more than one of them was an old student friend of Ben’s, and it didn’t take long to conclude that in these unprecedented times, the man the President needed was Ben.
Ben was quietly minding his own business, eating porridge, playing the sax and writing books. But when the President of the United States asked him for advice, he couldn't exactly say no!.
The problem was explained; Ben scratched his beard, and his bald head. He consulted his books and went for a walk to think. And then a thought occurred to him: “What if I just tell the pot to cook enough porridge for everyone? Then at least no-one need starve!”
No sooner had this thought crossed his mind, however, than another popped into his head - the sort of idea that made him so brilliant. He went home, gave his little pot a good clean, put a silver dollar in it and said, “Print, little pot, print”. And no sooner had he spoken than the pot filled with coins and as they overflowed, they kept on coming.
He called the White House. “You need to put me in charge of your central bank, Mr President” he said, “and then I think can solve the problem.”
“How will you do it?” asked the President.
“I’m afraid I can’t tell you, you will just have to trust me.”
Desperate, the President trusted him.
With pots and pots of money being made every day, Ben set about buying up bonds. Mostly government ones, but pretty soon he realised that he couldn’t afford to be fussy and was calling almost all the investors and traders on Wall Street.
What Ben could not tell the President was that he didn’t actually know how to stop the money being made. He knew how to tell the pot to stop making porridge, but everything he tried to make it stop making money, failed. So he was handing over truckloads of money to the folks on Wall Street, which made them happy, and hoping that they would do something with it (he wasn’t sure what) that would help revive the economy, fix the banking system and earn him the gratitude of his President.
As the money kept on coming, Ben realised he needed to get some of it out of the country. Desperate, he called his circle of university friends and persuaded them to help. Leroy bought gilts off the British pension funds, Mario bought them off all the banks in Europe, while the Goldilocks LLP folks worked tirelessly to engineer a situation where someone could use the money to buy Japanese bonds.
Still the problem wouldn’t go away. There was money everywhere and it was sending the prices of all sorts of things up. The banks and the fund managers bought copper, and gold, and platinum, and wine, and paintings and truffles and billions and billions of iPads. But the pot kept on making money
So Ben flew back to his homeland, and secretly visited the woods where he used to play as a child. He desperately needed to find his fairy godmother and ask her for help.
He searched and searched but to no avail. Exhausted, he sat down on an old tree stump, not realising that it was in fact, exactly the same one he had sat on all those years ago.
“Hello, Ben.” said a voice behind him. “I’ve been waiting for you.”
“Hello – is it really you? I have a problem!” said Ben, hugely relieved that the only person who could help was with him.
“Yes, I know. I’ve been watching you. Go back to the pot, and tell it to stop, auf Deutsch! Halt, Kochtopfchen, Bitte Halt! That should do it.” - “Oh and Ben, I’ve got a new book for you. This one’s by a man called Joseph Schumpeter. I’m afraid it’s long, badly written and all about wild spirits and stuff, but I think you’ll find some of the ideas interesting.”
And so Ben went back and told the pot to stop, in German. The stock market went back down, but the housing market had recovered and the economy was growing again. His friends were all relieved that although their currencies had fallen sharply, they hadn’t experienced a huge inflationary shock. Their governments were pleased with them and either because they were rewarded or because they had shrewdly bought vast stocks of wine and sold them before the pot stopped, they were all rich. Leroy bought a beautiful villa overlooking the sea, Mario bought a football club and others bought fine French chateaux.
Ben wasn’t into such material things. He was just happy to have helped and even happier to have found his fairy godmother. He went back to his books, starting by reading the newest one, and pretty soon he was an expert on creative destruction and the importance of allowing the business cycle to run its natural course rather than mess with nature.