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Damned If You Don’t
by
Sam’s father had had to leave school during the Thirties and go to work in order to bring in enough money to keep the family going. Grandfather Bending, weakened by long hours of labor that he was physically unfit for, had become an invalid, and the entire support of the family had devolved upon Sam’s father.
He could remember his dad talking about the breadlines and the free-soup kitchens. He could remember his grandmother, her hands crippled by arthritis, aggravated by long hours at a commercial sewing machine in a clothing center sweat-shop, just so she could bring in that little extra money that meant so much to her children and her invalid husband.
Could one invention bring all that back again? Could his own harmless-looking Converter plunge millions back into that kind of misery? It seemed hardly possible, but Sam couldn’t banish the specter of the Great Depression from his mind.
“Just how far-reaching would this economic upset be?” he asked Condley.
Condley had taken out his gold fountain pen again and was rolling it between his palms. “Well, that’s a question with a long answer, Mr. Bending. Let’s begin small and watch it spread.
“Banks are pretty safe today, aren’t they? The Federal Deposit Insurance Corporation insures all depositors for deposits up to twenty thousand dollars now. A bank is hedged in by so many legal fences that it is almost impossible for one to fail in the same way that they failed all over the country in the early Thirties. Even if one does fail, through the gross mismanagement or illegal activities of its governing board, the depositors don’t get excited; they know they’re covered. There hasn’t been a really disastrous run on a bank for more than thirty years.
“But banks don’t just keep their money in vaults; they invest it. And a significantly large percentage of that money is invested in power companies all over the nation. In an attempt to keep their heads above water, those banks would be forced to make up tremendous losses if Power Utilities failed overnight. It would force them to draw in outstanding loans for ready cash. It would mean turning in United States Savings Bonds, which would put a tremendous strain on the Government.
“In spite of that, most banks won’t be able to stay solvent because their other capital investments will be dropping rapidly in value. As Mr. Olcott said, our monetary system isn’t based on gold, but on production and goods. If Power Utilities and its members fail, you and your machine will have destroyed–made worthless–several billion dollars worth of machinery and equipment. You will have thrown tens of thousands of people out of work. You will have cut the underpinnings from beneath the American dollar.
“And it won’t stop there. What will happen to the companies that build the dynamos and the boilers and the atomic plants for the power companies? What will happen to the copper industry when the need for millions of miles of copper wire vanishes? They will all suffer tremendous setbacks, throwing tens of thousands more out of work and lowering the value of their stock drastically.
“The banks, then, will find their investments suddenly worth only a fraction of their former value. They’ll fail wholesale. And you can see what that will do to the Federal Deposit Insurance Corporation and other insurance companies.”
Sam Bending nodded slowly. He could see that. Insurance companies base their business on the prediction that a certain event–death, accident, or the failure of a bank–will happen to a certain percentage of their covered clients, and they adjust their rates accordingly. But something that would change a five-percent-failure rate to a fifty-percent-failure rate would break the company.
And the unemployment rate would go up even higher. And Sam thought of something the Secretary hadn’t even mentioned. State and Federal Unemployment Insurance. What would that drain do to the treasuries of the various governments involved?
Sam Bending felt as if the thing were snowballing on him. Where would the State and Federal Governments get that money? Taxes? Don’t be silly. How can you collect sales taxes when sales are dropping off because of unemployment? How can you get income taxes from depleted incomes? How can you charge luxury taxes when no one is buying luxuries?