If you happen to be in the business of finance you are always on the lookout for “haircuts.” A “haircut” is a small slice of the action that every financier gets when a security, bond or other financial asset passes through his or her hands. Getting haircuts is how the people who work in the industry get paid.

It’s no wonder a chunk of the bailout package that arrived on AIG’s doorstep was quickly trimmed out and divided up; it’s the way these people think and live. Of course, the citizens who paid for the bailout didn’t get haircuts, they got a $160 million trimming. Why, they ask, should any of us pay money to bail out the very people who contributed so heavily to this mess in the first place?

The problem is not really as complex as many would have us think. The explanation starts with the little bit of money that each of us takes out of our paycheck at the end of the week, our savings. Although it’s not much, it does represent a very sizable stock of money when added up.

Until a year ago, Americans saved less then 1 percent of whatever they earned. Although money as savings will be spent sometime in the future, it is, while in the bank, out of circulation. That means that it does not get spent at the local supermarket and become someone else’s wage, it does not go toward building a new garage and increasing the local demand for two-by-fours and plywood, it does not go to the guy who mows your lawn and wants to buy a new lawn mower. Everyone’s paycheck becomes someone else’s payroll except for that little small portion we call our savings.

If you think about it, the loss of that little 1 percent to savings would eventually bring down the entire economy. It would take awhile, but every time workers in America got paid, 1 percent more wealth would disappear into the banking system.

Eventually, there would be nothing left; it all would be stuck in the vaults.

Of course, in normal years, this doesn’t happen because the banking system does something with your savings. It takes the thousands of deposits from households and workers, bundles them up into different types of loans and injects them into the community. What leaked out of the money system in savings comes back in through the investment loans made by financial brokers. These new customers, the investors, take what was your money and use it to build the tools, factories, and businesses that will create our future productive capability; their payroll now becomes your paycheck. It’s a sublimely beautiful process when it works.

The problem is that the financial sector is feeling the same thing that we all are — fear. No one knows what is safe or not, what will give a good return on investment, which security is worth buying and which is going to fail. In this climate of fear and uncertain information, banks and similar institutions are much more hesitant to put everyone’s savings back into the system. They want to be ready for any emergency that could threaten their own existence. This means that savings are getting stuck and are not coming out the other end.

Instead of the system being balanced, or in equilibrium, it is becoming severely tilted. Every week, more and more funds leave the system through savings and do not come back in; every week a larger portion of our economy leaks out. The problem is compounded by the very natural behavior of households who, when they perceive an uncertain future, save more. A year ago, Americans were saving less then 1 percent. Last December the figure was up to 3.5 percent. Now it is at 5 percent.

My grandmother Bertha, the daughter of a Baptist minister and a backwoods farmer’s wife, liked to tell the Bible story of Joseph, a young man who was kidnapped by his brothers and sold into Egyptian slavery. God so loved Joseph, however, that he blessed the house of his Egyptian master so that Joseph could have an easier life. Bertha

was an expert on getting things done and she well understood that sometimes you have to look past the devil to see the larger picture.

Many of us are finding it very hard to look past $160 million, but if we don’t keep our eye on the larger picture, we may save ourselves right into the poorhouse.

Alan Haley of Skowhegan teaches economics and history at Waterville Senior High School. He may be reached at