Taxation and Inflation Skit

Skit 1: Money

Skit 2: Taxation and Inflation 

Dramatis Personae

King Roosevelt II—he needs money to finance his wars

Sir Hamilton—advisor to the king

Duke of Delano—leader of the king’s army

Thaler—an honest minter of gold and silver coins

Dilutio— a dishonest minter of gold and silver coins ready to help the king

Narrator

 

Scene 1

The king’s castle 

Narrator—Here we find King Roosevelt II considering a problem

King Roosevelt—What problems I have: my armies are running out of supplies and the people have almost nothing left to take as taxes to supply them.  If only I could find a new way to tax.  Everything I take from the people isn’t useful in supplying an army.

Enter Sir Hamilton

Have you given any thought to our problem supplying the armies?

Sir Hamilton—In fact, your highness, I have.  Remember I informed you that the people now are using coins made from gold and silver, minted by respected private citizens, as a medium of exchange.  These coins are so universally valued that you can use them to buy anything, even army supplies.

King Roosevelt—Go on, Hamilton.

Sir Hamilton—Well, although I’m sure you already thought of this, why don’t we just collect these gold and silver coins as taxes?  Then we can buy all the army supplies we want, anywhere we want.

King Roosevelt—Splendid!

Narrator—So things went well for the king, he collected gold and silver coins as taxes and bought all the war supplies he needed. 

Scene 2

At Dilutio’s mint

 

Narrator—Here we find Thaler asking Dilutio for the gold and silver coins in exchange for paper certificates. 

Dilutio—Your gold and silver coins are now loaded and ready for you and your armed guards to transport to your mint.

Thaler—Thank you, Dilutio.

Dilutio—I trust you, Thaler, not to tell anyone, but I hope no one else comes asking to redeem gold or silver certificates for the actual coins, I may run out of coins.

Thaler—How can that be, every certificate is backed by coins, is it not?

Dilutio—At one time, yes, but I’ve come up with a great way to make extra profits.  Instead of just charging a fee to store people’s coins in a safe place and giving them a paper certificate which they can use as if it were money, I now print more paper certificates than I have gold and silver coins and then loan them out at interest.

Thaler—Good heavens!

Dilutio—It’s a great scheme; I just have to make sure that everyone doesn’t come at the same time to redeem their paper certificates for gold or silver coins.  If they did, I’d be ruined, of course.

Thaler—Well, Dilutio, you can have your scheme.  I prefer to make an honest living.  I have only my reputation for the pureness of my coins and the redeemability of my paper certificates in coin on request to keep me in business.  I can’t risk my reputation on fraudulent schemes like your own.

Dilutio—But you’ll keep this just between us, right?

Thaler—I will for now, even while I advise you to abandon your scheme as soon as possible.

Exit Thaler 

Scene 3

The king’s castle 

Narrator—Here we find the king discussing military affairs with his top commander

Duke of Delano—Your highness, our last campaign was a success but we need more supplies and money to pay the troops if we are to continue on to victory.

King Roosevelt—I don’t see what more I can do, the people will revolt if I raise taxes again.

Enter Sir Hamilton

Hamilton have you any ideas on how we can raise more money for our next military campaign?

Sir Hamilton—Well, we could sell off some your hunting grounds, they would fetch a handsome sum.

King Roosevelt—Out of the question!  You have some nerve even suggesting it.

Sir Hamilton—Sorry, your highness.  There is one other scheme I have heard of, but it’s quite dishonest.

King Roosevelt—When have we ever had time for honesty here, except among ourselves?

Sir Hamilton—Fine, in that case, we could melt down all of the gold and silver coins, then add some base metal, like nickel, and then restamp them as coins with the royal seal.  Then we could buy many more extra war supplies without raising taxes and no one would know.

King Roosevelt—Brilliant!  Proceed with this plan right away. 

Narrator—So things went well for the king, he melted down all the gold and silver coins collected as taxes and reminted them with lower gold and silver content, ending up with twice the amount of money originally collected in taxes.  He bought all the war supplies he needed and no one caught on, at first. 

Scene 4

Thaler’s Mint 

Narrator—Here we find Thaler examining some of the new royal coins 

Thaler—So these are the new royal coins, minted, we are told, to protect us from dishonest minters who mint impure coins.  These coins don’t look or feel right to me.  I think I will melt them down and see how pure they are.

That evening, after melting down the royal coins

Ah ha!  So the king claims to be protecting us from dishonest minters who would defraud us while all the time it is he who defrauds us!  His royal coins have only half the gold they claim to have.  The king has been paying for war by defrauding the people.  No wonder goods cost more lately.  All of this new coinage is driving up prices. 

Scene 5

The king’s castle 

Narrator—Here we find the king thinking about what to do about unrest over high prices 

King Roosevelt—The coinage plan had worked so well until recently.  While the people seem to have no idea who or what is to blame for higher prices, they still expect me to do something about it; but with the war to fight, I simply cannot abandon the royal coinage program.

Enter Sir Hamilton

Hamilton, have you given any more thought to our problem with high prices? 

Sir Hamilton--Yes, I have actually.  I believe you will find my plan most clever and effective.  Perhaps you have heard of the minter and money lender, Dilutio.

King Roosevelt—Not until now, no.

Sir Hamilton—Well it seems that Dilutio, so my spies tell me, both mints gold and silver coins and loans out certificates that can be exchanged for gold and silver coins at interest.  Therefore there are more paper certificates circulating as money throughout the kingdom than there are gold and silver coins to redeem them.

King Roosevelt—So what does this have to do with the problem of high prices.

Sir Hamilton—Quite simple, we blame the high prices on Dilutio’s expansion of the paper money supply.  This draws attention away from our own practice of diluting the value of gold and silver coins.  Further, we can make ourselves into heroes of the people by taking control of Dilutio’s mint in order to make its operation honest again.

King Roosevelt—How can we convince Dilutio to agree to this?

Sir Hamilton—Again quite simple, for while we will give Dilutio’s mint the appearance of honesty by putting the royal seal on its coins and paper certificates, we can then print all of the paper certificates we want to pay for war supplies.  The whole affair will be so confusing that the people won‘t know what the problem is until it’s too late to do anything about it.  All of the paper certificates from Dilutio’s mint will be given as loans to the kingdom.  Dilutio will also be able to continue to loan his customer’s deposits and earn interest.  It’s a win-win situation; Dilutio himself actually suggested it to me.  If anyone complains, we will inform them that the good credit of the kingdom cannot be sacrificed; the loans must be repaid.

King Roosevelt—Pure genius!  Proceed at once. 

Narrator—And so Dilutio’s mint was taken over and the king got his money to pay for his war.  Soon the king found that Dilutio’s mint, now renamed The King’s Bank, could loan him money for just about anything he wanted.  Sure, prices in the kingdom would go up, but if the king didn’t spend too much of this new paper money, the small price increases could easily be blamed on bad weather, greedy storekeepers, or anything except their true cause—the king’s own spending of new paper money.  At least one problem remained—what if many people came to the bank to exchange their paper money for gold and silver coins?  Clearly there wouldn’t be enough coins and the dishonesty of the The King’s Bank would be exposed.  So Sir Hamilton convinced the king to outlaw all honest competition to The King’s Bank 

Scene 6

Thaler’s mint

Narrator—Here we find Thaler looking over the king’s latest proclamation 

Thaler—Well, this is the end.  I now must close my mint.  The king’s proclamation says that in the name of preventing dishonest men from making coins, all private mints like mine must be closed.  I guess the The King’s Bank dislikes having any competition when it comes to making dishonest coins.  Now all we’ll have is the king’s diluted gold and silver coins and his inflated supply of paper money.  The rising prices caused by this dishonest money are really just cleverly disguised theft by the king.  The king can pay for wars, reward his friends, and live in luxury, all at the people’s expense.  The people will be made poorer and poorer and never understand why.

Narrator—So concludes, for now, our sad tale of dishonesty in powerful places.  Justice may yet be served however.

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Skit 3: Empire