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Reminds me of an amusing story I read somewhere a while back: >It is the month of August; a resort town sits next to the shores of a lake. It is raining, and t
by deadmetheny 8y ago
Reminds me of an amusing story I read somewhere a while back:
>It is the month of August; a resort town sits next to the shores of a lake. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.
>Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspect the rooms upstairs in order to pick one.
>The hotel proprietor takes the 100 dollar bill and runs to pay his debt to the butcher. The Butcher takes the 100 dollar bill and runs to pay his debt to the pig raiser. The pig raiser takes the 100 dollar bill and runs to pay his debt to the supplier of his feed and fuel. The supplier of feed and fuel takes the 100 dollar bill and runs to pay his debt to the town’s prostitute that, in these hard times, gave her “services” on credit. The hooker runs to the hotel, and pays off her debt with the 100 dollar bill to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.
>The hotel proprietor then lays the 100 dollar bill back on the counter so that the rich tourist will not suspect anything. At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 dollar bill, after saying he did not like any of the rooms, and leaves town.
>No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.
- dalbasal 8y agoDeadly. This is exactly the sort of reason I enjoyed the book. Its interesting how the story adapts to being told backwards. In most economic stories, the man would spend the dollars and stuff would happen.
- nextweek2 8y agoIt's not that clever, they might be out of debt but they are also out of creditors. Nobody got richer or poorer just balances were settled. That's kind of the point of money.
- paulddraper 8y agoExactly. > However, the whole town is now without debt And without credit. I next expect to hear a ingenious story about someone who pays off a car loan in a way that results in an empty bank account.
- Gustomaximus 8y ago> they might be out of debt but they are also out of creditors Or now have access to credit again. Given they were each other's creditors they may not have been willing to extend credit past $100. Now being paid they are likely to offer that same credit again as Thier confidence of being repaid is stenghened. So this example also shows the requirement for confidence in markets whether the fundamentals support it or not. If one link refused credit it could snowball through the town grinding the flow to a halt. And to take this full circle, this keeping confidence and flow was the QE program.
- paulddraper 8y agoDoes it not seem more likely that the hotel proprietor would find a dollar bill in the couch, then pay part of his debt the butcher, who pays part of his debt to the farmer, who pays part of his debt to the store owner, who pays part of his debt to the prostitute, who pays part of her debt to the proprietor, who pays another part of his debt to the butcher.... For the town to maintain that debt for an appreciable amount of time seems the most precarious of contrived scenarios. It's like contemplating the effects of butterfly wings on a house balanced on a nail. It makes for a great story, but it took a lot of unrealistically meticulous effort to balance the house in the first place.
- deadmetheny 8y agoAre you seriously picking apart the logistical intricacies of a bloody joke? Take a step back and look at yourself, man.