10.06Cents, Common Sense, And Economic Failures…Part I
The Failure of America’s Economy and the Personal Economies of Americans…
This is a cautionary tale about four cousins - Elijah, Zachary, Mordechai, and Luke. Structured as an allegory, it describes their approaches to money and reflects the financial behavior of America and Americans over the last four decades. I hope you find this brief treatise enjoyable and instructive.
We begin the tale in 1968. Elijah, Zachary, Mordechai, Luke, and their families live in the mountainous coal-mining region of Appalachia - an isolated area with a relatively self-contained economy. The area’s economy as well as each of their personal economies rely on coal, coal-mining companies, government agencies that regulate coal-mining companies and other businesses that depend on the mining and selling coal to the broader market.
Each of these men views his and his family’s personal economy differently. Each expects a positive outcome and each approach produces predictable results – though often unexpected by the men themselves.
Elijah…The Value of a Penny
Elijah inherited 64 acres of prime farming and ranching land from his industrious parents. Elijah, however, didn’t appreciate the value of owning the land outright and applying himself to working the land raising crops and livestock for his family and for the market. Over the years Elijah raised money to support his family by selling off three fourths of the land in 16 acre parcels to his cousins Zachary, Mordechai, and Luke - more about them later - so that by 1968 each of the four owned equal amounts of land.
Elijah’s parcel sat on the eastern slope of Shelby Mountain. Although the land was mostly mountainside, about five acres lay on flat land, bordered on the east by Possum Creek and Possum Creek Road. The family home his parents had built and the four or so acres Elijah used for raising crops and livestock for personal consumption were separated from his cousins’ land by this border.
Just as Elijah was wondering how he could keep all that he had remaining of his parent’s estate, there was a knock on the door; enter The Mighty Coal Company. Jacob Ebenezer of The Mighty Coal Company wanted to buy a right of way across Elijah’s property to construct a railroad spur line, which, he explained, would carry coal from the rich Anglican Mine across Shelby Mountain to a rail line that would bring the coal to market.
Jacob offered Elijah two options. The first option was that The Mighty Coal Company would pay Jacob and his heirs a royalty of one cent per ton of coal that was carried over his land for as long as the Anglican Mine [or any other mine for that matter] used the spur line. If Elijah chose this option, The Mighty Coal Company would pay Elijah $1,000.00 up front and begin making royalty payments to Elijah as soon as the coal cars started rolling over the tracks carrying what the locals called “black gold.”
The Mighty Coal Company, explained Jacob Ebenezer, was still negotiating with other landowners on the route, and would likely be opening the spur line within five years if they could come to terms with the one hundred or so remaining landowners along the route. Elijah could keep the $1,000.00 if The Mighty Coal Company failed to complete the project.
The second option offered by Jacob Ebenezer was $10,000.00 cash up front. Elijah would receive no royalties and would not have to return any of the $10,000.00 if The Mighty Coal Company was unable to complete the project.
$10,000.00 was a lot of money in 1968 in Appalachian coal-mining country. Elijah thought it through this way. He could support his family in the family home for nearly another five years using the $10,000.00 from the sale of the right of way, the occasional sale of produce and livestock, and doing a few odd jobs when he must.
Elijah reasoned that if he took the $1,000.00 offer, he may never see another penny and, even if he did, it wouldn’t be for five or more years. Moreover, winter was coming and although he could use the extra money to get the family thru until spring, he’d be in limbo waiting for over four years for royalties.
Elijah took the $10,000.00.
The rest of Elijah’s story goes something like this. Elijah eventually sold all of his land and an option on his house to the man who owned the land that bordered his on the south. His neighbor had chosen to take the royalties.
Elijah died penniless and his neighbor took his land and house as agreed. Although Elijah was never a financial success, he remained a beloved character in the small Possum Creek community. His children, however, all left coal country for the big cities and there are no longer any remnants of his immediate family in Possum Creek.
Fast forward to 2008; every month since September of 1972 – 36 years; 432 months - The Mighty Coal Company has shipped an average of 100 coal cars carrying an average of 90 tons of coal each over Elijah’s property every day. That would have created $2,700.00 per month in royalties. That’s $1,166,400.00 in royalties never received. The Mighty Coal Company expects to be running coal over those tracks for decades to come.
A penny is an amazing thing.
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