It’s Always Sunny in Philadelphia, a show about the four misfit bar owners of Paddy’s pub, has never passed up an opportunity to discuss a controversial topic. The most recent season, which debuted last year, took aim at gender identity and President Trump in a way that most shows were not. Even earlier episodes exploited public concerns about North Korea, racism and gun control. Though the show made light of most situations, each episode did contain a hint of truth.
One episode, in particular, captured the public mood at the exact right time; The Great Recession. When the market reached a bottom in March 2009, a few months before Sunny released its recession themed episode, many Americans were still reeling from the ongoing economic crisis.
The episode begins with the gang describing how the middle class had dropped a few rungs lower on the socioeconomic ladders. Charlie, Mac, and Dennis squabble that waves of newly poor people were washing ashore. “These people have no idea how to live without money. They’re what’s called “new poor”. We’re “old poor”,” according to Mac. It’s an astute observation that stands up to reality. When the bubble burst, many indebted middle-class families saw the value of their homes plummet, and as a result their net worth. Combine this with stagnant wage growth and America’s middle class has significantly shrunk since 2007.
Let’s see how well the rest of the episode recounts the Great Recession.
The Gang Falls Victim to a Ponzi Scheme
Bernie Madoff kept investors at bay for nearly 30 years. It wasn’t until early December 2008 that the giant Ponzi scheme began to crumble. The massive downturn in the stock market had driven clients to withdraw $7 billion in assets from Madoff, a request that his firm could not fulfill. With redemptions exceeding investments, the scam collapsed.
By 2009, the recession had helped unravel almost 200 Ponzi schemes, with victims located around the world. One those being the fictitious Frank Reynolds. “I lost all my money in a Ponzi scheme, Charlie. I’m broke,” he clamors. Sure, this may sound dramatic, but many victims of Madoff saw billions of dollars vanish in December 2008. Their life’s work up in flames. A decade later, lawyers have recovered almost $14 billion of the $19 billion in lost principal, not including the phony profits added to customer accounts.
The Gang Takes Desperate Measures
Sure enough, the analogy extends further. Frank pressures Sweet Dee to take out a high-interest loan for a door-to-door knife and vacuum business. “Are you willing to destroy your credit? ” he asks, “ We’re gonna take out a big loan in your name and get an office.” She retorts, “It’s never really been a problem before.” This seemed to be the general mentality of the public in the 2000s. In the years leading up to and following the Great Recession, household debt ballooned to record levels as the dream of homeownership suddenly became a reality for many Americans. Mortgage lenders were brazenly extending loans to customers who could not afford to repay the debt, leaving households with nearly $10 trillion in housing debt by Q3 2008. Combine that with the $2.7 trillion in non-housing debt, and the debt bomb leveled the US economy. By then, many families were collecting debt on credit cards to cover basic expenses like food and clothing. In many ways, the Reynolds captured this over-reliance on debt after the worst parts of the Recession.
The Gang Hits the Printing Press
When the recession hit a decade ago, the Federal Reserve stepped in with an initial round of quantitative easing to revive the ailing economy. The central bank bought up government securities from retail banks and other institution banks with the hope of lowering interest rates and enabling more bank loans. While it was founded with the right intentions, many of the reforms were met with severe criticism. Some chastised the Fed for printing money. But this accusation missed one critical point; the Treasury, not the Federal Reserve, cranks out dollars.
There was, in fact, some talk of money printing on the episode. Mac and Dennis created a currency to drum up business for the bar.
“We call it Paddy’s Dollars. Now we distribute that out to people for free initially,” explains Dennis, “ Then they become customers, and then they bring in new customers,”
“And once they’re in, they have to use real dollars to buy Paddy’s Dollars,” Mac replied.
“That’s exactly right, and that stimulates our own internal economy,” said Dennis, after seeing that Mac understood his argument.
Of course, the gang’s efforts to lure in new business turned awry. Customers visited the bar for a free drink and spent zero real dollars, adding to the bar owners huge losses. Even though the Fed never printed money, QE had a somewhat similar outcome. The economy eventually recovered from the devastation of the recession without the intended boost in inflation.
The Gang Receives a Bailout
By now, the gang’s separate schemes to get rich have failed, and it’s pretty clear what comes next. Frank receives a bailout. “The government is reimbursing me all the money I lost!” he said. But in the real world, the government never gave individual households a helping hand. Instead, the Fed loaned AIG $85 billion to save the insurer from bankruptcy, and President Bush approved the Troubled Asset Relief Program, which gave the US government $475 billion (originally $700 billion) to purchase equity in select companies.