Is This How the Stimulus Works?--An Example
Apr 13, 2020 10:38:10 #
Sent to me by a friend:
It is a slow day in the small town of Podunk, and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit. A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.
As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.
The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.
At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves. No one produced anything. No one earned anything...
However, the whole town is now out of debt and now looks to the future with a lot more optimism.
Is this how a Stimulus package works?
It is a slow day in the small town of Podunk, and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit. A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.
As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.
The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.
At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves. No one produced anything. No one earned anything...
However, the whole town is now out of debt and now looks to the future with a lot more optimism.
Is this how a Stimulus package works?
Apr 13, 2020 10:41:39 #
Apr 13, 2020 10:59:27 #
I edited Pump handle to Podunk after you replied, but nevertheless, you can take all the story and business elements out of it and treat it as a pure math problem and it's still a tough nut to crack for me. But my first guess is the hotel owner is out $100. Some would ask, even though he paid off his debt to the butcher?
Apr 13, 2020 11:05:04 #
No. The money given to the motel manager is redefined as a loan, is forgiven and the traveler has to figure out how to repay his wife. Each $2 trillion has to be repaid at about $5600 by every current U.S. citizen.
Apr 13, 2020 11:34:40 #
Apr 13, 2020 14:00:11 #
Thinking about this after I posted it. Everybody was made whole by the hotel manager paying off his debt (to the butcher) which in the end, came out of the hotel manager's pocket. So there is no free lunch, after all.
Apr 13, 2020 14:30:47 #
Fotoartist wrote:
Thinking about this after I posted it. Everybody was made whole by the hotel manager paying off his debt (to the butcher) which in the end, came out of the hotel manager's pocket. So there is no free lunch, after all.
But the hotel manager returned it to the tourist. The tourist changed his mind and took his "deposit" back. He didn't rent a room, so it didn't really come out of the manager's pocket.
Apr 13, 2020 15:17:38 #
Longshadow wrote:
But the hotel manager returned it to the tourist. The tourist changed his mind and took his "deposit" back. He didn't rent a room, so it didn't really come out of the manager's pocket.
You are right. The hotel manager didn't suffer. Everyone was made whole because everyone paid their debts. No one was out. In the end, the $100 put back on the counter came from the hooker who discharged her debt to the hotel manager. So the hotel manager in effect took the ($100) receivable from the hooker to pay his debt to the butcher. Everyone started to become whole because the hotel manager kicked it off by paying his debt. They all owed it to each other. If this is right, than this is a principle of why it is so important to pay your debts because all debts ripple through the community.
My conclusion, Not a stimulus package. No one made anything. No one suffered. Paying your debts in a small town especially is a good thing. I'm going to take a break for the rest of the day.
Apr 13, 2020 20:06:38 #
Fotoartist wrote:
You are right. The hotel manager didn't suffer. Ev... (show quote)
The hotel owner borrowed the money. The debts wrapped around and ended at the hotel owner, with which he paid back the loan.
If the Hotel owner was not at the end of the loop, it would not have worked.
Six people or 6,000 people. the "loop" must be completed for it to work with no one "missing out".
Apr 13, 2020 20:26:31 #
Longshadow wrote:
The hotel owner borrowed the money. The debts wrapped around and ended at the hotel owner, with which he paid back the loan.
If the Hotel owner was not at the end of the loop, it would not have worked.
Six people or 6,000 people. the "loop" must be completed for it to work with no one "missing out".
If the Hotel owner was not at the end of the loop, it would not have worked.
Six people or 6,000 people. the "loop" must be completed for it to work with no one "missing out".
Yes, only you said it more succinctly than me. In the end to make the whole thing work promises men keep, contract or handshake must be honored or the chain is broken.
Apr 13, 2020 20:34:40 #
Fotoartist wrote:
Yes, only you said it more succinctly than me. In the end to make the whole thing work promises men keep, contract or handshake must be honored or the chain is broken.
Cool.
It had me going.....
Amazing how it works.
Apr 13, 2020 22:04:03 #
Fotoartist wrote:
Sent to me by a friend: br br It is a slow day in... (show quote)
Isn't that how a free market system works. The only difference is that you are supposed to add a few cents each time the bill passes hands.
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Apr 13, 2020 23:26:54 #
Fotoartist wrote:
Thinking about this after I posted it. Everybody was made whole by the hotel manager paying off his debt (to the butcher) which in the end, came out of the hotel manager's pocket. So there is no free lunch, after all.
Actually, the hotel manager is still out $100. The tourist's money was used to pay off each person's debt and then the next person and so on until the hooker gave the hotel manager $100 to pay off her debt, but the tourist took his money back, which means the hotel manager not only has no money, but the hooker no longer owes him any money...so he looses.
Apr 13, 2020 23:30:27 #
Rolk wrote:
Actually, the hotel manager is still out $100. The tourist's money was used to pay off each person's debt and then the next person and so on until the hooker gave the hotel manager $100 to pay off her debt, but the tourist took his money back, which means the hotel manager not only has no money, but the hooker no longer owes him any money...so he looses.
Nope! He paid off his debt to the butcher using the bill from the tourist.
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Apr 13, 2020 23:40:57 #
Bill_de wrote:
Nope! He paid off his debt to the butcher using the bill from the tourist.
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But, he still should have $100 for the debt the hooker owed.
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