Papelitos: An Economic Parable For Our Times

Part children’s fable, part economic parable, Papelitos was written by Hernán Casciari, one of the rising stars of Argentinean literature, with the help of his eight-year old daughter Nina. It is a tale about how a small, idyllic village succumbs to the destructive influence of financial speculation, triggering asset bubbles and ultimately wealth destruction for most of its inhabitants.

The story is couched in such simple terms that even a ten-year old child can understand some of the forces that lie behind our current economic malaise. Read it and if you like it, tell it to your children (presuming, of course, you have any) — for it is ultimately they who must one day learn never to repeat our generations’ mistakes.


orsai 1Once upon a time, there was a quiet village where all the neighbours lived happily together. They all led a nice and simple life and everyone wanted to prosper. Pepe was one of them. One afternoon Pepe took a walk through the village and he started getting thirsty. As he continued, his thirst grew and grew. Once back home and while uncorking a bottle, he suddenly realised something no one had realised before: in the village there were no bars! Pepe thought that if he set up a bar he could be happy as well as make others happy, too, by giving them a drink. And what’s more, he could make money in the process.

For two nights Pepe made a list of what he would need to launch the village’s first ever bar. For starters, he would need ten thousand coins to buy tables, chairs, glasses, drinks and a paddock for the villagers to leave their horses. Then he would need two weeks to convert his home into a bar, and another two weeks to get the tables lined with thirsty villagers.

His friend, Moncho, who dropped in on him that afternoon, suggested an excellent name for the bar.

Now, it goes without saying that Pepe didn’t have ten thousand coins, but that night he thought of a great way to get hold of them. On Saturday afternoon he cut up a thousand slips of paper and wrote on each “Coming soon, Pepe’s bar.”

papelitos 2On Sunday, after church, he went into the town square dressed in his best suit:

– “Dear neighbours, I’m going to open a bar on the outskirts of the village,” he said, and everyone stopped their conversations to listen to him.

– “What a great idea!” Ramón exclaimed, with his cigar in his mouth.

Pepe felt perfectly at ease at the centre of everyone’s attention and he showed them all the paper cut outs.

– “Each of these 1,000 pieces of paper costs ten coins,” Pepe told his neighbours. “Whoever buys one of these paper slips must make sure to look after it carefully and not lose it, for in a month’s time, when my bar has customers, I will pay twelve coins for every piece of paper that comes back to me.”

– “But didn’t you just say that each piece costs ten coins?” Asked Moncho, who was widely viewed as the village idiot. “Why would you give away two coins?”

-“I would not be giving them away, Moncho. I would be compensating those of you who helped me fulfil my dream, which is to have a bar on the outskirts of town.”

-“It makes sense,” the mayor said, “a whole lot of sense.”

-“It sounds good to me,” said Ernesto, who was rich and understood business.

– “What a great idea!” Francisco the priest said, as he fumbled in his pockets.

So it was that in the space of just one Sunday morning, Pepe rounded up all the money he needed to set up the bar. His neighbours gave him exactly ten thousand coins in exchange for the thousand paper slips.

– “I bought two pieces of paper,” said Sabino, who was hard up but optimistic.

– “I got thirty-six!” exclaimed Enrique, who was greedy and haughty.

– “I bought five pieces of paper, and I look forward to getting drunk at the bar to celebrate the easiest money I’ve ever made,” Luis said.

And everyone laughed.

Pepe went home that Sunday with ten thousand coins in his bag and fell asleep thinking about his bar.

On Monday morning he set out for the big city, where he bought lumber to build a sturdy bar counter. When he returned home, he got straight down to work. A week passed and not once did he venture down to the village square. Hence, he didn’t realize that he had started a strange craze among his fellow villagers for little pieces of paper…

The First Week

The town square was packed with people, which was unheard of for a Monday. Several neighbours had spent the entire night cutting out and writing on their own paper slips, because they had discovered that they too, had plans to offer.

Some slips said “Coming Soon: Horace’s Ice Cream Parlour.” Others said “Prepare Yourselves for Carmen’s Hair Salon.” Some even said on them “At the end of this month, Moncho will travel to the moon.”

The square suddenly became very crowded and some villagers had to climb on lampposts, or scale the fountain, to buy or sell shares in the new projects.

This happened on Monday, but Tuesday was even worse. On Wednesday it was impossible to even cross the square. To restore some semblance of order, the Mayor set aside a small building for the villagers to congregate without destroying the public spaces. The small building was opened on Thursday morning and became know as the Hall of Papers.

And so it was that by Friday everyone who had a project had already obtained the necessary coins and were getting down to work. Horacio started looking for the best ice cream flavours, Pepe sawed wood for his bar counter, Carmen sharpened scissors for her new hair salon and Moncho bought two horses for his trip to the moon.

papelitos 3All that was left in the Hall of Papers was a handful of neighbours who had never had an interesting idea for a project. All they had were pieces of paper.

– “I need money for cigarettes,” Ramon complained out loud. “A few days ago I swapped my only 10 coins with Pepe for this piece of paper, but Raul the tobacconist will not accept it, and I need to smoke.”

– “The same thing happened to me!” Luis said. “I want to go to the movies but my pockets are empty!”

Gradually the whispers of discontent began spreading.

– “In three weeks, Pepe will pay 12 coins to the person who gives him this slip,” Sabino said, with shiny eyes. “You can buy it right now for nine coins!”

– “It’s a deal,” shouted Ernest, who was rich but always wanted more, tearing the slip out of Sabino’s hands.

Ramon and Luis also sold their papers for less than ten coins and, as one ran off to buy cigarettes and the other to the movies, other neighbours saw that this was a new way of doing business, even though there were no more projects to sell.

Some climbed on chairs, others onto tables, and began offering what they had.

– “I’ll swap four of Horatio’s papers for two of Carmen’s!”

– “I’ll give eight of Moncho’s papers and my horse for fifty coins!”

When all of a sudden the priest, Francisco, entered the room, all fell silent.

– “The day Moncho began selling his slips,” said the priest, “I decided to buy some because Moncho is a fool: He was selling them for seven coins and promising to pay back 15 on their return. But now I need coins to get the church bell fixed. So I’m putting my Moncho slips up for sale for six coins each.”

– “What is Moncho’s project, father?” Quique asked.

– “He’s building a very long coach, drawn by two horses,” said the priest. “The poor fool wants to travel to the moon.”

Quique shook his head in disbelief.

– “What if I give you them for five?” the priest Francisco haggled.

– “I’ll take them for four, father,” Quique said, in a gesture of Christian charity.

– “Oh, God bless you, my son!”


Dear child: in the real world, the Hall of Papers is called the Stock Exchange. The papers have one of two names: bonds or debentures. The twelve coins Pepe will pay when the bar is full of villagers (or the 15 coins Moncho will pay if he ever makes it to the moon) are called the bond’s face value.

The Second Week

Only seven days had passed and Pepe’s home no longer looked like a normal home. In the dining room was a polished wooden bar, the bathroom had become two bathrooms (one for ladies, one for gentlemen) and the walls were painted an intense navy blue. As he hung up the neon sign on the front of his new bar, Pepe smiled to himself. He was delighted with the progress he’d made on the project.

As he had yet to visit the village since beginning his work, he did not know that the lives of his neighbours had been turned upside down in a frenzy of papers that constantly changed price and owner.

Even the Mayor, after talking it over with his aide one night, decided to join the new craze. The second Monday morning, he went out on to the balcony with a megaphone and said:

– “Ladies and gentlemen, the village square was seriously damaged after all the furore over the papers.”

And it was true. The first week of buying and selling of projects had left the gardens and public spaces in a terrible state.

“I need to raise funds to repair the fountain, renovate the streetlamps and, while we’re at it, buy a new coach,” said the Mayor. “To that end, I am putting up 20,000 official papers for sale, each costing a horse. When the fountain has running water again, when the streetlamps once again brighten our square and when my new coach is ready, I will pay back two horses for each slip. The official slips are now on sale. Hurry, hurry, they’ll run out fast!”

Indeed the Mayor’s paper slips sold out in record time in the Hall of Papers: all the people pledged their horses and took to making their daily rounds on foot.

The sale of slips continued to grow till it reached such a scale that it was impossible to tell who owned what. Some slips were very desirable, such as those belonging to Pepe, who slaved day and night to get his bar ready. But others were not wanted at all, such as Moncho’s, since his vessel for making trips to the moon consisted only of two skinny horses attached to a cart, and then another cart, and then a third one. Nobody believed that Moncho could make it fly.

Ernesto, the richest villager, had embarked on a frenzy of buying during the first week, and now Moncho’s slips were burning a hole in his pockets. But he also had plenty of Pepe’s slips, so he invented something which he called “Ernesto’s Bundles”.

These were sealed packages with a hundred slips representing a broad spectrum of projects. For example, they might contain ten slips for Pepe’s bar, twenty for Horace’s ice cream parlour, and seventy for Moncho’s strange vehicle for making moon trips.

Throughout Thursday Ernesto’s Bundles were a great success among the villagers as they frantically sought to get hold of slips for Pepe’s bar or the Mayor’s public works.

By Friday, however, Quique had worked out the trick, and he made a public announcement in the Hall of Papers:

– Watch out, neighbours! Ernesto’s Bundles sometimes come with slips for Pepe’s bar or the Mayor’s official projects at the top, and that’s fine. But the bottom of the piles is full of slips for Moncho’s mad enterprise, which will never take off. I suggest that before buying Ernesto’s Bundles, you should stop by my house for advice. My fee for each consultation is six coins, or two of Pepe’s slips.

During the rest of that week, and the next, buyers of the slips flocked to Quique’s home before buying Ernesto’s Bundles. Ernesto and Quique, who had played card games together for years, never spoke to each other again.


Dear child: in the real world, the official slips offered by the mayor are called Public Debt. Ernesto’s Bundles are called collateralized debt obligations, while Quique’s house – the place to go to find out which of Ernesto’s Bundles to buy – is called Investment Banking.

The Third Week

Twenty days had passed since the frenzied activity had begun and the villagers began noticing that some projects were almost completed, while others had hardly begun.

Pepe just needed to build the paddock so that the customer’s horses could graze outside the bar.

Horace had managed, successfully, to whisk milk and fruit for ice cream, and all he needed was to bring in ice bars from the big city.

But Carmen had not yet found a suitable place to set up her hair salon, although she had accumulated dozens of sharp scissors.

And what about Moncho? His horses were looking healthier and healthier, thanks to their constant brushing, and he had now managed to tie them to four carts. Still, it seemed impossible that his vessel would be flying to the moon by the week’s end.

Villagers who had Moncho’s or Carmen’s slips were growing restless and for neither love nor money could they sell them to anyone. Until, that is, Quique came up with a great idea:

– “Listen! Quique said. “Those of you who still have Moncho’s slips, I can sell you Quique’s Peace of Mind for them…

– “What are you talking about?” asked Raul, who had several of Moncho’s slips.

– “It’s very simple. You pay me two coins every night, and by the end of the month, if Moncho has not travelled to the moon, I will personally give you those fifteen coins myself. Exactly what he owes you.”

– “Even if the trip to the moon fails?”

– “Even if it fails.”

– “Great idea!” Sabino said. “That way, we will feel much calmer and be able to buy more papers.”

– “That’s why my idea is called Quique’s Peace of Mind,” Quique said with a smile, and many residents began paying two coins every night, just in case some of the projects did not take off.

Amidst the euphoria of all these new ideas, no one in the village had noticed that the mayor was no longer to be seen in the Hall of Papers. Nor had they noticed that the streetlights or the fountain in the square were still unrepaired.

The mayor had fulfilled one of his promises though: he had bought a new stage-coach, which he had used to flee the village with everyone’s horses in tow.

The aide, who was the Mayor’s right-hand man and had known all about the scam from the beginning, decided to take drastic action to ensure no one would discover his boss’ absence. And his idea was truly ingenious. He went to the Hall of Papers with a blackboard and began giving a mark (from 1 to 10) for each of the village’s many projects.

– “What are you writing on the blackboard?” Ernesto asked him.

But the aide pretended to ignore the question and continued working in silence.

For Pepe’s bar he awarded eight points, for Carmen’s hair salon, five, for Horace’s ice cream parlour, seven, and for Moncho’s vehicle for trips to the moon, two. Then pretending that he had almost forgotten, he gave nine points to the renovation of the streetlights.

– “Now,” he said. “That’s it.”

– “What do these numbers mean?” they all asked.

– “They are the Mayor’s ratings. They are so that no one buys pieces of paper without knowing whether they will recover their coins or horses,” said the aide. “It is for your benefit. You can trust these ratings.”

All the villagers appreciated the gesture and that afternoon many of the Mayor’s slips were resold at a very high price.


Dear child: in the real world, Quique’s idea of offering Piece of Mind on Moncho’s slips is called debt default insurance, or CDS (Credit Default Swaps). And the large blackboard on which the aide gives ratings for each project is called a Rating Agency, which has been known to make big mistakes – sometimes inadvertently, sometimes deliberately.

The Last Week

On the day of the inauguration of his bar, Pepe got up early and slowly walked to the village. From a distance he looked back at the front of his bar, with the neon sign glaring. The bar was called The Moon, just as Moncho had baptized it on the first day. Now everything was ready. All that was missing was the arrival of customers from the village, with parched throats.

He walked the five miles to town putting up posters in all the trees along the way. “The Moon Bar, Grand Opening Tonight.” With each new sign he put on a trunk, he would stand staring, full of pride.

During his walk into the village Pepe fantasised that, from then on, dozens of villagers would come on horseback to his bar and everyone would be happy talking and drinking.

papelitos 4But when he arrived in the square he could not believe what he saw. For a moment he thought that he had taken the wrong road, and that he was in a different village. It looked like a war had taken place.

The streetlights and the fountain in the square were smashed to bits. Some villagers walked in circles mumbling to themselves, and there were knots of men and women arguing and fighting.

– “What has happened here?” Pepe asked Horace, who was crying against a lamppost.

– “Oh, Pepe! Do you not know?” Horacio sobbed. “Everyone went crazy with the papers. With mine, with Carmen’s, with yours … With all of them! Suddenly we began to have more slips than coins. Then there were no coins left and the horses disappeared.  And then the mayor fled the village, and the vendors of Ernesto’s Bundles went bankrupt. And then the sellers of Quique’s Peace of Mind could not pay anyone and escaped in the dead of night … And now everyone is ruined …”

– “What the hell is all this about ‘Ernesto’s Bundles’ and ‘Quique’s Peace of Mind’?”

– “It’s a long story,” said Horace.

– What about your project and Carmen’s?

– My ice cream parlour failed: there were no horses to fetch ice from the city. And Carmen has no customers for her barber shop; can you not see that everyone is pulling their hair out with their own hands?

Pepe was silent.

– “I need a drink,” said Horace.

– “I have a dry throat,” said Luis.

– “Have you opened your famous bar yet?” Sabino asked. And other villagers gathered round to listen.

Pepe knew that without any horses in the village, no one would ever come to his bar on the outskirts. He also realized that he could never return the ten thousand coins.

papelitos 5And then he saw Moncho in the middle of the square. His horses were the only ones left in the region, and they were dragging three carts with two wheels each, like a train. As it passed by many villagers were jumping on board. Others were forming queues for their turn to get on.

– “Where are you taking them?” Pepe asked Moncho.

– “To your bar!” Moncho said with a huge smile. “To The Moon!”

A sign hanging on the broken fountain, said:

“Moncho makes trips to The Moon. Price: one coin, Free Return.”

– “Did you know this would happen?” Pepe asked, hugging him. “Did you know that everyone was going to run out of horses?”

– “No,” said Moncho. “All I knew was that people can go to a bar on horseback, but they can’t come back on horseback. And since I do not drink, I thought my business would be to take people to and from The Moon.

Pepe got on the first car and shouted:

– “Let’s go to The Moon, then! Free drinks for everyone today!

And everyone cheered.


Dear child: in the real world, the stories of Pepes setting up bars or Monchos making trips to the moon hardly ever have happy endings. In the middle there are always the Quiques, the Mayors, the aides and the Ernestos who spoil everything. But when they do work, when something magical happens, they are called dreams. And they are often great fun.

[This story was translated by Don and Doña Quijones]

front cover, orsaiPapelitos was featured in the 12th issue of Orsai magazine. To see more articles, illustrations or comic strips from Orsai (in Spanish), click here. 

You can also read an interview (in English) with the magazine’s co-founder and author of Papelitos, Hernán Casciari.

3 thoughts on “Papelitos: An Economic Parable For Our Times

  1. Oh my gosh!! That’s a wonderful fable! Thank you for posting that!!!

    (I’ve read a few books about the financial crisis, including Lewis’s _The Big Short_, Reinhart and Rogoff’s _It’s Different This Time_ and Posner and Morgenstern’s _Reckless Endangerment_ (and I think I got the names wrong on the authors of that last book, darn it), that fable does the best job I’ve seen yet of explaining bonds and CDS’s in simple terms.)


    1. Thanks for the praise cgoodthings. I’ll be sure to mention it to Hernán the next time I see him. He’ll be delighted to know that people are enjoying some of his work in English.


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