As fish are not a very storable commodity, the sushi chefs only buy the fish they need every day. Now, the Bangas have historically been a trim and fit people. With the newfound abundance most everyone on the island has gained weight and eats many more rolls of sushi than they had before.
However, soon Krugman notices that the islanders are packing on the pounds and chastises them in his latest column. They don’t listen too much, but the islanders have nearly reached a plateau in the amount of sushi that they can eat every day.
As more and more of the newly built boats come online and begin to sell fish to the sushi makers, the price that the sushi maker has to pay levels off and actually begins to fall. There are even days when there are fish that cannot be sold and go to waste and rot before being eaten.
More new and bigger boats are finished and begin working. Fish prices continue to fall. As prices fall, the revenue available to the fishermen falls as well. Now the fishermen try to catch even more fish to make up for the lost revenue. After all, they have workers and interest on their new loans to pay. Most boat owners do not want to lower the wages they pay or lay off any of their workers. The boat owners soon notice that their personal income as well as money available to pay interest is falling with the falling price of fish.
The boat owners complain about their deteriorating situation. Krugman feels their pain and lends to the boat owners directly. Some of them invest the new money into even more boats to somehow earn enough to pay their now enormous debts to the sharks.
Predictably fish prices continue to fall.
Eventually, the boat owners bow to reality and began cutting wages and laying off workers to be able to afford the payments on the new boats.
Unemployment is a new thing for the islanders. Obviously, the rising unemployment begins to affect the demand for sushi and in turn rice and the makers of tools for their respective trades. Prices begin to fall for sushi, rice, and even more for the Cutlers.
So much so that all of these owners are forced to lay off workers.
Now the sharks began to notice that the price of fish was falling and new boats did not look like such a good investment. The price of boats begins to fall, and with it the demand for the shipwrights flatlines. There are no more boats needed, maybe for years. They are forced to begin laying off their workers.
All of the islanders who bought into new boats try to sell their shares. The market is in free fall. Rice workers who were sure they were rich, are now poor again, overnight.
At this point the islanders are fit to be tied. They go to Krugman to ask if he has any suggestions for their problems.
Krugman is a thoroughly trained modern economist. He had seen this many times in our modern economy. He canvased the island to see what was going on. He noticed that the problems began when the price of fish began to fall. Krugman sat down and explained to the islanders about the history of the Great Depression and he had some ideas.
Start the discussion