The problem of modern banking
In this short story, we use a simple analogy to break down the enormous complexity of the modern banking system in a way that anyone can understand.
The king of the squirrels
The young squirrel
Once upon a time, there was a young squirrel who climbed up and up and up and up a mighty oak tree to find an acorn.
Once finding the acorn, he climbed backwards down the tree slowly and precariously until he was able to bring the acorn to his nest.
Totally exhausted, the little squirrel rested, and his young family feasted on the acorn with great contentment.
Day by day, the young squirrel went up the tree to get an acorn and realized that bringing these acorns down the tree was difficult. But he knew he couldn't drop the acorn, since other squirrels would steal the acorn if he dropped it. So he had to bring it down himself precariously every time.
The old squirrel
Seeing how hard his labor was, he went to the old squirrel and asked him what he should do. The old squirrel told him that if he found a macaw feather along the way, he should bring that down quickly and easily first, as other squirrels would trade their acorns for the macaw feather.
The invention of paper money
The next day, the young squirrel went up the tree and found himself a macaw feather. He quickly hopped down the branches and traded that feather for an acorn. This was so much easier than carrying a heavy acorn down. Now he could afford to go up and down twice.
Even though he had climbed the tree twice, the young squirrel still had strength left over, and so he took some time to visit the edge of the forest, where he saw a great river.
The forest
There, he met his friend lugging down a heavy acorn. And his friend said, “How do you have time to look out on the great river? Isn't your family depending on you getting acorns?”
The young squirrel shared his secret. “If you find a macaw feather, you can get down a whole lot faster, and other squirrels will trade you acorns for the feather.”
The market
Soon the whole community had learned the secret. Whenever a squirrel saw a feather, they brought them down instead of the nut.
Soon a market, not of acorns, but of feathers sprang up near the great old tree in the center of the forest.
The invention of commerce
Squirrels traded feathers for new nests, for shiny rocks, and for anything else other squirrels would enjoy.
But feathers were not like acorns. They didn't grow on trees, and they were incredibly hard to find, and as the easy-to-find feathers had been found, feathers became even more valuable.
Gold as rare
That night the young squirrel went home only to find his youngest was very ill. Carrying his little baby squirrel to the old squirrel, he cried for help. And the old squirrel, coming out from his hole, took the little baby in his arms and said, “Quick, get spotted mushrooms from the market.”
Lending
The young squirrel rushed to the market, three feathers in hand, to get a mushroom. Seeing a mushroom dealer, he pushed in, cutting the line, almost running over an old squirrel. “8 macaw or 20 crow a mushroom,” shouted the dealer as if speaking to a crowd far away. “8… but 3 is all I can afford,” the young squirrel said. “Move along, then,” the shopkeeper said in that same impersonal tone.
Soon the market would close, and he'd have no chance of finding a spotted mushroom out in the dark.
At that very moment, a crow squawked at him from a branch above the market. “Spotted mushrooms cost far more than 3 macaw feathers,” the crow said.
The young squirrel blinked. “But it took me a whole month to find these.” The young squirrel held up the three macaw feathers in his paw. His paw was shaking.
“I just need one mushroom,” he said. “My baby is sick.”
The crow glanced at the mushroom seller’s stall. The seller was already packing up, tying knots, pulling cloth over baskets. The spotted mushrooms were there, but the seller kept them close, as if the night might steal them.
The crow looked back down.
“You can get one mushroom for twenty crow feathers,” the crow said.
“Twenty,” the young squirrel squealed, imitating the crow’s squawk. “But I only have these.”
The crow hopped down to a lower branch, closer now, close enough that the young squirrel could see the small grey edges on the crow’s beak.
“This is what crows do,” the crow said. “Crows take macaw feathers and keep them safe in the high nests. Then crows give the forest crow feathers that stand for macaw feathers.”
The young squirrel frowned. “Stand for them?”
The crow nodded. “Three crow feathers, one macaw feather. That is the promise.”
The young squirrel stared at the market below. The mushroom trader’s line was down to one, and signs were being folded. A few were looking up at the crow to see what would happen next.
“If the baby needs the mushroom tonight, the young squirrel needs crow feathers tonight,” the crow said, his interest perking up. “Crow can lend.”
The young squirrel’s ears lifted a little. “Lend me… twenty?”
The crow nodded once. “Twenty now. Then twenty-five back later.”
“Twenty-five,” the young squirrel repeated. “Why more?”
The young squirrel looked down at his macaw feathers again.
“I can work,” he said. “I can gather acorns. I can gather sticks. I can pay.”
The crow lowered its head. “Crow believes young squirrel can pay. That’s why crow offers to lend.”
Then the crow pointed with its beak.
“Give your feathers,” the crow said.
The young squirrel froze. “Now?”
“Now,” the crow said. “Crow hold those until crow gets back twenty-two.”
The young squirrel’s paw closed tight around the three feathers, then released them as if giving up. “Here, we gotta hurry.”
The crow took them and tucked them under its wing.
Then the crow dropped a small bundle into the young squirrel’s paws.
It was a bundle of crow feathers, counted and tied.
“Twenty.”
The young squirrel’s heart kicked hard. The feathers felt dusty, colorless, almost too light to matter.
“How can these be worth anything?” the young squirrel wondered. The young squirrel looked toward the mushroom seller.
The crow spoke again, firm now. “Go,” the crow said. “The night is closing the market.”
The young squirrel ran.
At the mushroom stall, the seller saw the bundle of crow feathers and stopped tying knots.
The young squirrel put the bundle down. “One spotted mushroom,” he pleaded.
The seller counted the feathers quickly. Twenty. Then the seller handed over one spotted mushroom wrapped in leaf.
The young squirrel clutched it like it was warm.
As he turned to run, the seller spoke low.
“Pay the crow on time,” the seller muttered. “Do not make the crow come looking, or you will see the king.”
The young squirrel ran back under the branches, past the empty stalls, past the fading lanterns, and he looked up once.
The crow was still there, watching.
The young squirrel held the mushroom up. “Thank you.”
The crow nodded. “Two sunrises after this one,” the crow said. “Bring twenty-five crow feathers to the high root by the hollow oak. Then the crow returns the macaw feathers.”
Behind him, above the market, the crow watched the last squirrels leave. And under its wing, the crow kept the macaw feathers safe, as if it were nothing, and as if it were everything.
Rushing back, the young squirrel burst into the home of the old squirrel. “Is it enough?” he asked. “Yes,” he said.
The old lion
The young squirrel stayed up that night making sure his baby recovered well. “Thank you,” he said to the old squirrel. “Going already?” asked the old squirrel. “But you have been up all night!”
“I have work to do early,” the young squirrel said while slipping out the door.
I have got to find a faster way of paying back the crow, he thought as his footsteps led him to the market.
Suddenly, BOOM, BOOM, BOOM, thumping and shaking rocked the trees around him, leaves falling off them. Instinctively, the young squirrel looked up, only to see a lion towering above the market.
Suddenly, a young squirrel was swept off his feet and found himself in the clutches of the mighty lion. The lion asked him, “Little squirrel, are those macaw feathers the squirrels are trading with?”
Excited to see the lion, the king of the forest, up close, he boldly announced, “Yes, we found them up in the great tree, at its highest canopy, in the nest of a parrot.”
The lion paused and then tilted his head as if thinking. “Hmm,” he said.
The young squirrel asked, “My king, is there anything I can do?”
The lion, as if startled, remembering that he had picked up a squirrel just then and there for the first time, put the squirrel on his back. “Did you know, young squirrel, that the forest is running out of acorns?”
The young squirrel seemed startled. He had realized that he had been climbing longer and longer to get acorns, but never thought that he'd run out. He answered the lion, “What will happen if all the squirrels eat all the acorns before new ones can grow?”
The lion answered him, “Since the forest has made me their king, I will ensure that no squirrel goes hungry.”
At this the old lion placed the squirrel on its back and stood on its back paws. “Do you see that forest over there, young squirrel?”
The squirrel answered, “I see it.”
“Over there are many more nuts than we have here,” the lion said.
Putting the little squirrel down, the lion gave him five feathers and said, “Be on your way, young squirrel. Go buy yourself something nice. And don't worry about the nuts.”
The young squirrel fainted right after being placed down, just by the sheer thrill of the experience. Still clutching five feathers, he woke up and noticed that they were more pristine than any feathers he had ever found before.
Realizing at that moment his debt, he was overjoyed that he'd already be able to pay back 15 crow feathers’ worth. He was more than halfway through the biggest challenge of his life.
Scurrying home, he stashed the feathers in his acorn closet and told his family and the old squirrel everything. The old squirrel said, “You made the right decision going to the market. Go there again and see if there's opportunities tomorrow to trade and make a profit. You'll need to pay back that crow quickly.”
The council of the macaws
The next day, the young squirrel went to the market just as the old squirrel counselled. And just as he was getting close, the other squirrel stopped him and said, “Look, look up! The lion is at the top of the great tree.”
Just then, a huge branch broke through the canopy, tumbling all the way down and landing on the market. Squirrels fled just before it landed on their market, throwing feathers, market stalls, and signs in the air.
Soon, squirrels with special hats started shouting, “No trading while the lion is above the market.”
Seeing this, the young squirrel turned to climb a tree to find nuts or feathers. As time passed, he kept climbing, finding nothing on the lower branches. By chance, he found himself above the lion, and grabbing the branch below him with his hind feet, he hung down and listened in.
The lion seemed to be speaking with a whole group of macaws. “The squirrels have begun to trade feathers rather than nuts because they're so much lighter,” he said.
Invention of government debt
“Now, give me one feather from each of you, and I will pay you back not only the feather you give me, but ten more for every 100 you give me. And you can use those extra feathers to buy even more curiosities in the squirrels marketplace.” The macaws agreed and began to pluck their feathers and hand them to the lion.
Seeing this curious sight, the young squirrel jumped on the branch where this great council was taking place.
At this very moment, all the macaws dispersed in flight, all shouting, “Good,” “good,” “good,” as they went.
As a little squirrel, the young squirrel was taken aback greatly at this sight.
Seeing this, the old lion chuckled and looked at the young squirrel. The lion said, “It’s as if you scared them off.” The young squirrel said, “My king, I've never seen a lion in a tree before.”
The old lion laughed and said, “We've always been able to climb trees. But we have no need to hide in trees, seeing that lions are unmatched on the ground.”
As the old lion turned to go, the young squirrel was shocked to see that he carried in his mouth a wicker basket filled with a thousand pristine feathers. “No one has ever seen that many feathers,” he thought to himself. He almost fainted again.
The lion’s assembly
The very next day, as the young squirrel went to the market to trade, he saw the old lion sitting there, with all the squirrels surrounding him.
As the young squirrel scurried up, he heard what seemed to be the final part of a speech from the old lion. “I'll pay everyone a feather a stick, if it’s a good stick.”
Then the old lion gave a great roar, dismissing the assembly. “A feather just for getting a stick?” the young squirrel asked the group assembled.
Another squirrel responded with sparkles in its eyes. “We'll all be rich. Good sticks easy to find!” Other squirrels nodded and chattered with excitement.
Now the old squirrel piped up in his cracking old voice and said, “With so many new feathers being given to everyone, won't squirrels value them less? Will squirrels still be able to buy an acorn with a single feather?”
But even as the old squirrel was speaking, the little squirrels had already begun to scurry away to gather sticks.
The young squirrel too hurried to gather sticks. 5, 6, 7, 8, 9. By the end of the day, he would have 10 sticks. His eyes gleamed, knowing that he's gone from one acorn a day to ten sticks worth ten feathers, which he knew could buy ten acorns.
Excitement filled him as he thought about the next day, in which he would be rewarded 10 feathers worth 10 acorns.
The great bridge
The next day, the squirrels assembled with overwhelming excitement to get their feathers. The lion commanded the squirrels to heap up all the sticks.
Once they had finished making a great pile, the lion said to them, “You must work for me one more day before I'm going to give you your feathers. We're going to take these sticks to the river.”
“To the river?” the squirrels retorted. “That's a long way!”
“Come with me!” the lion commanded.
So all the squirrels hauled all the sticks to the edge of their forest. There it was, the great raging river, the one no squirrel had ever been able to cross.
On the other side, they could see a forest brimming with acorns so plentiful they even peppered the ground. All they would have to do is build a bridge and they would be in that land!
“Let me introduce you to the two people most critical to this bridge. Follow their instructions carefully,” said the lion, his voice booming. From behind him, two shy beavers waddled with their massive teeth fully displayed. Immediately, their eyes widened. “Sticks!” they shouted. Plunging headlong into the pile, they grabbed the biggest and ran to the water's edge. “Do as we do,” they said.
Squirrels quickly grabbed stick by stick and followed them in, with the great lion watching over them.
At dusk it was almost complete, but not quite. The squirrels stood on the edge of the great bridge, with longing, looking over at the acorns in the twilight.
They had little more to go, but with the light dimming, the lion ordered them all home. That night, no squirrel slept, as they thought only about the acorns on the other side.
The great bridge
Government taxes to pay back debts
Brimming with excitement the next day, the squirrels were overjoyed to see that the bridge had been finished by the beavers. The lion now handed each squirrel one feather for each stick they had contributed to the bridge. They noticed these feathers were more pristine, being freshly plucked from the macaws. “But before you can cross, just know that you must pay me one feather each time you cross the bridge.”
The squirrels tossed their feathered unusual irreverence and scurried across the bridge, giddy with excitement, grabbing acorns left and right.
Government projects leading to an increase in goods and services
The whole day they scurried to find all the acorns peppered on the ground until none were left. Soon they began climbing trees. They found themselves a few feathers too, but seeing that they were not pristine.
The old squirrel's marketplace speech
The next day, all the squirrels brought their extra acorns to the great marketplace.
There the old squirrel stood up and said in a tried old voice, “Now all your feathers will be worthless because you've all been paid so many feathers for just two days’ work.”
The squirrels ignored him, because so many more acorns had been found, and everyone had more feathers. One acorn was still worth one feather.
Then suddenly, the old tree began to shake. “The lion is climbing the tree again!” said the squirrels as they scurried, twigs and branches falling everywhere.
Having had such an adventure so far, the young squirrel was determined to listen in on the old lion and macaws.
This time, the young squirrel went up deliberately to listen in. “There aren't enough pristine feathers in the forest!” the lion said. The macaws yelped. “But you promised to pay us not only the pristine feathers we gave you, but ten for every hundred more, and we can’t accept anything less than the pristine feathers we gave you.”
The lion, calming the macaws down, said, “I know, but there are other macaws that will lend me their feathers and I'll pay you back using their feathers.”
“And how will you get them to lend you their feathers?” The lion puzzled for a moment, thought about it carefully. “I'll tell them we have a new project. A project that will be as successful as the bridge. Seeing our success, they'll surely lend me their feathers.”
Debt-money being impossible to pay back as the money owed on the original loan is greater than the money in the whole economy
The great tower
The next day, the lion gathered all the squirrels again and said, “See how rich I've made you all? I can make you even richer.”
“Tomorrow, everyone who gathers a stone for me will get a feather. Meet me on the other side of the bridge.”
The squirrels, excited about their first success, once again gathered stones in exchange for feathers, with which the lion instructed them to build a great tower.
The squirrels worked with hurried excitement, once again from dawn to dusk, building a great tower.
When the squirrels went to cross the bridge for the night, the lion said to them, “Now that I've given you pristine feathers, you cannot walk around with these lousy feathers that you find lying around anymore.”
Government fiat as the only accepted currency
The squirrels were somewhat disappointed but, anticipating a new influx of feathers, they tossed all their old feathers into the river.
The next day, they continued to work on the tower, paying the toll across the river both dawn and dusk.
As the squirrels worked, the lion went up to a group of macaws in this new patch of forest. “Give me your feathers. I will build a tower so we can find a new forest that has acorns lying on the floor, so the squirrels will not need to climb the trees to get them.
See, I will give you not only your feathers back, but ten more feathers per hundred, which you can exchange in the squirrel’s marketplace for all sorts of goods!”
So the lion built his tower and found yet another patch of forest they could access with a bridge. However, this would take even more feathers to build.
So the lion argued with the macaws. “I'll raise the tolls across both bridges so that every feather will eventually find its way back to you. I know there aren't enough to pay you all back. But that'll keep you satisfied until we can build the bridge, and then surely there will be a new group of macaws I can borrow feathers from on the other side.”
So the squirrels built the tower and the lion stood up on it. He saw another forest of easy-to-gather acorns on the other side.
Behind the story - Branching paths
The lion and the squirrels continued to build bridges and find new macaws to lend them feathers. There were never enough feathers to pay back all the macaws. So, they had to keep finding new macaws.
Here there are two branching paths. Either the lion can keep finding forests, and some of those forests contain enough acorns and feathers to pay back the macaws, or the lion runs out of forests that pay sufficiently. The squirrels become lazy, and the macaws end up earning all the feathers.