It is a slow day in a small Irish town. The rain is misting and the streets are deserted.
Times are tough, everybody is in debt, and having a hard time making ends meet, let alone climbing out of debt.
On this particular day a rich German drives into the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.
The owner gives him the keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.
The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.
The pig farmer takes the €100 note and heads off to pay his bill at the feed co-op.
The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the pub.
The publican slips the money to the local prostitute drinking at the bar, who has fallen on hard times and had to offer her services on credit.
The hooker rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.
The hotel proprietor puts the €100 note back on the counter.
At that moment the traveller comes down the stairs, states that the rooms are not satisfactory, picks up the €100 note, pockets the money, and leaves town.
No one produced anything. No one earned anything. However, the whole town is now out of debt and looking forward to a brighter future.
And that, gentle reader, is how a successful bailout works.
3 comments:
Quite a unique approach to the economy. Lucky that everybody owed everybody just the exact same amount and were dedicated about paying their bills.
Actually, given the little I know about how economic theories are constructed, I find that the most plausible part. "Assume a rational consumer", after all....
Well, its a little more complicated than that. That one hundred Euro note would not make it past the third or fourth person because the government (the tourist?) would tax a goodly portion of it away each time, so it reduces to nada by the time it gets back to hotel owner. So the farther that money went away from the hotel, the less good it does.
So, when the German tourist comes down and demands his hundred euro note back, the hotel owner does not have it. But all the townsfolk have a piece of it to give to him. So the tourist goes away with the money, and the hotel owner is now in debt to the tourist.
Thats what happens in a bail out.
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