St Claude and the Dragon

St Claude and the Dragon

Once upon a time, a long, long time ago, a King and his Queen ruled over a peaceful and prosperous land, with fertile valleys surrounded by high mountains. The people were happy and contented, growing their crops and tending to their flocks.

Unfortunately, it came about that a great inflationary dragon began to prey on the country, wreaking havoc, burning crops and villages. The spears and arrows of the soldiers appeared totally ineffective and no-one knew what to do. The price of food went up and everyone was suddenly much poorer. In the end, the Finance Minister propose that what they should do was to strike a deal with the dragon -  by sacrificing a maiden to it every month so that it had enough to eat and would leave the rest of the people and their livestock alone. These were very politically incorrect times and so it was agreed, that every month there was to be a ballot and some poor young girl was to be left out by the dragon’s lair to be eaten alive. Everyone was very sad, but they all got on with life and things were a bit better than when the dragon was wreaking havoc. The economy prospered, in a sub-optimal sort of way, and prices came back under control. The Finance Minister gave himself a pat on the back for a job well done though the King wasn't so sure - surely they could aspire to do better than this?

So the King promised a huge reward to any brave knight who could kill the dragon. Many tried and they all failed, mostly ending up barbecued. And time passed until eventually, and inevitably, the name of one of the King’s own two daughters was drawn. The Queen screamed at her husband to do something, both his daughters cried and cried and the King summoned one of the last two remaining knights who were willing to take on the dragon.

Sir Al was not a young man, though he had been a renowned dragon-fighter in his youth. Nowadays, he preferred to play his saxophone in jazz bars. Still, he put on his armour and strapped on his sword, before setting off up into the mountains above the town to where the dragon had its lair. There, he found the Princess, tied to a tree, but of the dragon there was no sign. Fearlessly, Al wandered into the cave and crept forwards until he could see a long green snout. It wasn’t moving. Al gave it a poke with his sword. Nothing. He played his saxophone and still nothing. Clearly, the dragon was dead.

Well, that’s a piece of luck, he thought to himself, as he untied the Princess and set off back to the castle. ‘The dragon is dead’ he proclaimed and everyone was so excited at the news that nobody went to check. The King was over the moon and could not thank Al enough. He gave him his daughter’s hand in marriage, and recommended to the church that they pronounce him a Saint. Al went off to write his memoirs and to cash in on the lecture circuit.

For quite a long time everything was fine. The crops grew, the cattle got fat and the people got rich. House prices went up very fast but consumer prices were well behaved and everyone felt very rich indeed. What nobody seemed to realise was that dragons can sleep for a very long time and hardly breathe at all when they do. But eventually, they do wake up and when they do, they tend to be very hungry.

And of course, that is exactly what happened. Eventually, the dragon woke up, looked out of its cave, couldn't find anything to eat and set off in search of breakfast. It burnt down whole villages, killed all sorts of animals and not a few farmers. Everyone was in a state of panic. Immediately, they held a new draw to find a new sacrifice and this time, it was the King’s second daughter’s name which came out of the hat. She cried, the Queen cried, and the King went to call on the last remaining Knight – who had always been the maddest of them all.

Sir Jean-Claude, whose friends just called him Claude, lived at the top of a tower,  down by the main river in the valley. He had never believed that the dragon was dead because he was a historian. ‘Dragons don’t just die, they can sleep for a thousand years’ he had been crying out. You can’t control them by good fortune; you need strict monetary principles and an independent central bank, preferably a German one.’

Well, as before, the Princess was tied to a tree outside the dragon’s cave and Sir Claude was dispatched to do his best. Nobody held out much hope and they all went and hid in the homes.

Claude waited until evening when there was no-one out and about. He put on his armour, for show, and fetched his sword. He also packed a mule with explosives. Then off he set. He crept up as quietly as he could to the dragon’s lair and unloaded a huge pile of explosives inside the entrance of the cave. Then, he attached a long fuse and unrolling it, went and hid some considerable distance away, connecting the other end to an electric ignition plunger.

When Claude pushed the plunger down he set off an almighty explosion. And a huge landslide, which sent boulders the size of houses crashing down the mountain into the town around the castle. It was supper time and everyone was at home. Hundreds of people were killed, not to mention the devastation that was caused to crops and to the animals that were in the fields.

‘Boff’ thought Claude, giving a very Gallic shrug and lighting his thirtieth Gauloise of the day. ‘You can’t make an omelette without breaking a few eggs, as they say’. The mountain had fallen down on top of the dragon which really was dead this time. And by some miracle, the Princess was still alive – just. She was very badly injured and would never look quite the same again but she was alive. So, Claude picked her up, put her on the mule, and brought her back down the mountain to the castle, where he expected to receive the same lavish rewards as Sir Al.

The King saw his wounded daughter, looked around at the total devastation and tried to kill Sir Claude, who fled for his life.  That was the last that was seen of him though rumours persisted that he had returned to his native land and was to be found smoking, drinking Pernod and muttering about the need for constant vigilance.

Meanwhile, the destruction of infrastructure resulted in an outbreak of deflationary plague. Many people died, others just moved away, so house prices collapsed and businesses closed. The once-prosperous Kingdom, was now populated mostly by the aged who could not leave, whose pensions were inadequate to live off comfortably and who were saddled with the huge debt the state had incurred in attempting to rebuild the broken homes and the broken economy. But the dragon was gone and they tried very hard to convince themselves they were now better off than before. 

A Christmas Carol, 1997

A Christmas Carol

As Christmas Day approached, Alan Scrooge reflected that although not everyone was looking forward to the festive season, the family firm had enjoyed another record year. Since he had taken over the Family Reserve Board from his uncle, Paul Ebenezer ‘Humbug’ Scrooge, ten years ago, he had prospered. At it might not have happened had it not been for the change that came over Ebenezer shortly before he retired.

For years, Ebenezer Scrooge had been known as a man hard and sharp as flint, who despised Christmas, hated the company of his fellow man and was happy only when he was in his counting house, counting his money supply – which he targeted assiduously to make sure it increased by just the right amount each year. Indeed, the only thing he cared about more than his money was his reputation and the credibility of the Family Reserve Board (which had been in pretty poor regard when he himself took over, way back in the early 80s)

Then, one year, something happened. Ebenezer never spoke about it but a terrifying experience changed his whole outlook on life. Having spent his whole career trying to make sure his money supply didn't grow too fast, he was confronted with the risk of its growing too slowly, instead. That was a huge shock, so much so that when young Alan took over the family firm, Ebenezer’s message was that there is another way, a new paradigm, a path to a Goldilocks period where all is for the best in this best of all possible worlds.

Alan Scrooge took this message to heart and as the firm prospered, he employed more and more people, paid them more and more money and watched the company’s share price soar.   His clerk, Bob Cratchit, was promoted to Treasury Secretary and even Tiny Tim followed in his father’s footsteps, becoming a partner at one of the firm’s subsidiaries. True, the company’s bank accounts with both the Bank of Japan and the Bank of Europe were deep in overdraft, but he paid his interest in full and on time, so Scrooge wasn't unduly worried.

As Christmas 1997 approached, and Scrooge prepared to relax with his wife in the comfort of his Virginia home, he took the liberty of opening a bottle of vintage port, lighting a long cigar and reflecting that he, unlike some of the managers of competitors’ firms in Asia and elsewhere, was doing rather well – and achieving this wealth without any of the nastiness that characterised his father’s era. Indeed, he was (he thought to himself) just about the most popular guy around these days.

After dinner, Alan received a phone call from an old G7 colleague, Karl-Otto Marley, who he had not seen for so long he didn't realise he was still alive, phones from his castle high in the Taunus Hills.

‘Alan, I know you think your uncle was a miserable old so and so but I fear you have gone soft in the head. Furthermore, the ghosts of your predecessors are inclined to agree with me. You've forgotten your principles and are so keen on having fun you could ruin the whole party. I have a message for you. When the clock strokes ‘One’ on each of the following three nights, you will be visited by a Spirit. Listen to what they have to tell you and ignore them at your peril’.

‘Oh stop being so miserable, have a beer and a bratwurst and call me when you’re in a good mood’ answered Alan before hanging up. Not in the least bit bothered, he settled down with his glass and drifted off to sleep, dreaming of excessive exuberance on his next vacation – at a beach resort in Thailand, which is such good value at the moment.

He was woken by the sound of the old clock above the fireplace sounding twelve. He looked at it, remembered what Marley had said and spent the next hour rather nervously watching the minute hand tick round. No sooner had the bell sounded the hour, than lights flashed and the curtains were drawn aside, by a mysterious hand.

‘What or who are you?’ screeched Scrooge, terrified.

I am the ghost of Christmas Past. And I have something to show you.

Scrooge was so scared it took a major effort to move but he had no choice other than to sit up and look at the television screen, which was flickering to life. What looked like an old newsreel came into sight. The first frame showed a hotel in New York – a hotel Scrooge knew well, the Plaza. There was a group of men in a meeting-room and he recognised his uncle, old Ebenezer. Then, the scene moved: He could see a big screen covered in numbers and Japanese symbols. In front of it were frantically excited traders watching a sea of blue as prices rose, seemingly fo ever. The film continued and now he could see Japanese tourists queuing in shops in New York and London, Japanese bankers buying works of art, and huge buildings. Everyone was smiling. But after a while, the mood in the film changed. Now the traders were watching red prices, falling and falling. The people in the streets were looking miserable and there were shots of tramps and beggars. Then, the screen went black.

What happened? Asked Scrooge

‘They believed in a new paradigm, thought asset price inflation didn't matter, because goods prices were under control. They allowed a liquidity bubble to build and it all went wrong. Good night.’

The next thing he knew, Scrooge was awake, in his bed, shaking. The pale light of dawn filtered into the room.

That night, Scrooge was nervous. He had been promised three visitations. Still, that didn't stop him eating a hearty dinner washed down with an excellent claret (the merits of a strong Dollar are many, he mused). After dinner, he smoked his cigar and went to bed, albeit a bit apprehensively.

This time, he did not know what woke him but when he looked at the clock by the bed, it was five to one. Five minutes later, he heard the clock downstairs chiming. Nothing else happened so he walked to the door and opened it. On the other side, stood another ghostly figure.

‘Come along’ said the spirit. I am the Ghost of Christmas Present, and I have things to show you’.

Scrooge followed the spirit into the living room, where the television came to life and people appeared on then screen. This time, he saw groups of people he knew vaguely from the Pacific Central Bankers’ Conference. They were discussing the merits of pegging their exchange rates to the Dollar. Then, he saw dealing rooms with people selling Dollars for Thai Baht, Korean Won and so on, while elsewhere in the same room, others were buying Treasuries of brash young Americans in braces. Then the scene moved on and he saw more happy people watching as large screens showed share prices rising, across Asia. He saw them build gold courses, and buy gold clubs, cars, airplane tickets and queue at shops across Europe and the US. They even bought real estate off the rather unhappy-looking Japanese he had observed the night before.

Then, he saw the central banks defending their currencies as they collapsed; share prices were falling, "For Sale" signs were on the luxury real estate projects, building sights were covered in idle cranes and the faces of the people were all dejected.

‘What happened?’

‘They fixed their currencies to a soft Dollar, woke up to find a strong one, failed to control their money supply, didn't watch their balance sheets and thought that asset price inflation is good. They allowed a liquidity bubble to build and it eventually burst. Good Night.’

The next thing he knew, Scrooge was awake in his bed, shaking, as the pale light of dawn once again came in through the window.

That evening, he limited dinner to a bowl of soup and lay off the wine completely. He didn't bother going to bed at all – he just sat in the living room, in front of the TV drinking hot chocolate and reading the IMF annual report. When the clock struck one, a knock sounded at the door. With some trepidation, he called out: ‘Come in, Ghost of Christmas Yet To Come!’

The spirit said nothing, but turned to look at the television.

This time, Scrooge saw himself, at New York’s swanky ‘21’ club, proclaiming the wonders of the new paradigm. He saw the happy faces as the big board at the New York Stock Exchange showed blue. He saw the rising Dollar, and the queues at the department stores. He saw ‘Sold’ signs on houses in the Hamptons and most of all, he saw brash young men wearing braces, smoking cigars and looking happy.

Then, he saw newspaper reports of profit downgrades, he saw people receiving notices that they had lost their jobs, in companies that exported to the East. He saw prices go up in the shops but nobody pay them. He saw banks merging but most of all, he saw the screens at the stock exchange turn red and the happy smiling faces turn grim. And the Dollar, his precious Greenback, did exactly what the Won, the Baht and the Yen had done before it, falling precipitously.

What happened?

They thought there was a new paradigm. They thought asset price and wage inflation didn't matter. They failed to spot the deflation from the rest of the world. They allowed am, liquidity bubble to build ant it all went wrong.

‘But what can I do?’ asked Alan. ‘If I raise rates, it will make things worse in Asia. If I don ‘t, the bubble at home will get bigger.’

‘I am a spirit, not a shadow FOMC member’ said the ghost, ‘but if I were you, I would persuade Congress to increase the IMF quota, bail out those unfortunates in Asia, and raise rates a little to let the air out of your bubble. But what do I know?’ And with that, he vanished. 

The Elves and the Loanmaker

Once upon a time there was a young banker, who had followed his dream of making a fortune in the financial markets. He worked very hard and was very honest but he could not earn enough to live upon – at least, not to live to upon in the most expensive city in the world. 

The young banker knew that he wasn't making enough loans for the bank, and that the loans he made were not very exciting. Very soon, he would lose his job and with a mortgage and no savings, he had no idea what would happen then. 

So the banker laid out his loan proposal paper-work tidily on his desk, put his blackberry in his overcoat pocket, and stopping for just one half-pint of shandy with his friends, headed for the small Docklands flat he shared with his wife, who had prepared for him a simple meal. They didn’t know what to do, as there were no more jobs available in the banking industry, particularly not for hard-working and honest bankers. And the skills he had learnt in his time in finance didn't set him up very well for anything else. So, the banker and his wife ate their meal, watched X-Factor, said their prayers and went to bed.

In the morning, the banker joined the trudge to work long before the sun came up. He could no longer afford the ruinously expensive Financial Times to read, not could he visit Starbucks for his morning beverage. A copy of the Sun and a cup of tea from the local greasy-spoon had to suffice.

But when he got to his desk, the young man found that his loan paperwork had been re-structured into a proposal of awesome complexity and beauty. On the front of the file, he read the word ‘CRAPPY’, which stood for Collateralised, Rate Adjusted Principle Protected Yield. The good man looked at the workmanship, and while he didn't really understand how the thing was put together, he knew it was wonderful. It was a masterpiece. So good, in fact, that when he showed it to a Ratings Specialist, he was so impressed with its sub-clauses and margin-adjustments, that he declared it to be a ‘Sure Thing’ which offered the elusive ‘Money for Nothing’ of investment.

The wonderful new product was sent to the sales force at the bank –a brash group of young men and women who mostly drove fast cars and drank imaginatively-named cocktails after work. And pretty soon, there was demand for the CRAPPY product. A wealthy investor from the Far East even came in and bought some, at above the market price.

The honest banker went home happy for the first time in ages. His share of the credits from the sale would be enough to keep him and his wife clothed and fed for many weeks and now he had a little more time to work on the next loan product. He had once again started, and laid out his file on his desk before going home, but this time he had done so with a spring in his step.

The banker bought the Telegraph and a cup of coffee – not quite the FT and Cappuccino favoured by the sales force, but he still didn't want to trust his luck had turned. But when he got to his little cubbyhole of an office, he was amazed. Once again, on his desk, all his work had been most awesomely transformed.

This time,  the file read ‘Uncorrelated Synthetic Enhanced Leverage Equity-Sourcing Strategy’ Or USELESS.

Once again, the young banker could only stare and marvel at the workmanship, the detail, the acronyms, the legal jargon and the overall beauty of the thing. He signed the bottom and sent it to the head of sales after completing the necessary PIMP (product implementation) form. And once again, the sales force rejoiced and the investors loved it. Everyone was so impressed that the young (honest) banker was taken out to drink cocktails by exotic credit sales people who flattered his ego and whetted his appetite for the finer things of life.

And so it went on. The poor young banker got a bit less young and lot less poor. The pied-a-terre was a bijou residence in Mayfair, the frugal wife was magnificently adorned in Jimmy Choos and Dolce & Gabbana. 

The banker was still honest however that he wanted to know where his good fortune had come from. So one evening he arranged to meet his wife after work, and they had a tete-a-tete."Darling", he said, "tonight I think we should go back to the office and sneak into my (rather opulent) office on the 43^rd floor. I want to see who or what it is that has brought us such good fortune".

So that is what they did. They went to his office and hid behind a plasma TV. And in due course, they were amazed to see two elves sneak into the room. They sat at his desk and they worked for several hours, structuring incredibly brilliant credit products, and then left.

"Wow", said the banker. "Cute" said his wife, "but we must do something for them". The elves, she pointed our, did not look very opulent. They were wearing very few and very old and very torn clothes, and they didn't have shoes at all.

Now the banker’s wife had been,( before the previous recession when there was still a manufacturing industry in the country" a very talented seamstress. So when they got home, she set to work. She took down some curtains and made a set of glamorous velvet suits for the little elves. And then she cut up a leather jacket to make some little boots. And the next night, her husband left the bundles on his desk before he left for the night.

The next morning, there was no new exotic product on the desk. Just a note, saving "Thanks".

The banker’s act of kindness didn't do his career any good. Without the help of the elves, his next few ideas were for more conventional lending. He was, in any case, beginning to understand that all the products the elves had designed depended on borrowers increasing leverage and on investors selling the correlation of default probabilities between different parts of the global economy. This seemed dangerous, for reasons the honest (but, frankly, not very clever) banker couldn't quite put his finger on. Anyway, he decided to focus on helping companies reduce leverage, and on helping the bank lend rather less money than they had before.

The sales force couldn't see any point in this and o could the management. The honest banker’s bonus shrank and after a while, he decided enough was enough,.

The banker invested in a dress design business for his wife, and while she was at work, he became a house-husband, looking after their new child and studying for a degree in economics.

His ex-colleagues were not so lucky. Those pesky elves had appeared to help them but got everyone into a whole heap of trouble. Everyone ended up defaulting on the super-complicated loan products and sued the banks for not explaining them properly. The King of the country had to come in and buy all the credit products, handing over money newly-printed by Santa Claus in his workshop at the North Pole, in a Quantitative Christmas experiment. this did mean that there was enough money for some most Christmas presents, but the cocktails with fancy names, the designer shoes and the glamorous frocks were out of reach of everyone but footballers and their friends.

Ben's Magic Cooking Pot

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.

After Harvard, the friends all went their separate ways, but they vowed to stay in touch. Some went on to study, or teach, while others went to work for the government and quite a few went to work in a new firm called Goldilocks LLP, which was trying to take over the whole global financial system to make it more fun (for them).

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.