How the Greeks pay their debt

[GSF]

A wealthy German business man walks into a hotel and lays a 100 euro note on the counter. I want to look at your rooms, the owner says go ahead. When he goes upstairs the hotel owner takes the note and runs next door and pays down on the debt he owes the butcher for meat. The butcher runs down to the bar and uses the note to pay down on his bar tab. The bartender in turn uses it to pay down on the debt he owes the prostitute sitting at the bar. She then runs back to the hotel and pays down on the debt she owes for the use of their rooms to do her business.



The wealthy German business man walks down stairs and says the rooms are not acceptable. He takes the note and walks out the door. That's how it works, no one has done any work and they've used everybody else's money to pay down on their debts.

[Eric Bosworth]

I like it!

[BeeMaster2]

 

[Dallasbeek]

I think the economic theory behind this is called the velocity of money and that's exactly how all economic systems work, maybe even including communism.

[Michael Bush]

Dallas has it.  This is how the entire economic system of the world works...  The part that was left out is that all those people to whom money is owed, will count that debt as an asset.  As if those owing it had already paid it even though they may never see it.

In reverse, it goes something like this:
Person#1 deposits $1,100,000 in Bank #1. Bank#1 has to keep 10% liquid so it lends $1,000,000 to Person#2 to build a very nice house.  Person#2 is not ready to start yet, so he deposits it in Bank#2.  Bank#2 now has $1,000,000 more in deposits and since they are only required to keep 10% of that liquid, they lend out the other $900,000 to Person#3.  Person#3 deposits this in Bank #3.  Bank#3 now having an additional $900,000 in deposits lends out $810,000 of it to Person#4 and keeps back 10%... etc. etc. etc. so that original $1,100,000 that was deposited becomes about $100,000,000.

[Dallasbeek]

Very good, MB.  Now if you'll explain how the government(s) printing fiat money enters into the equation, we'll nominate you for a Nobel Prize in economics.

[Dallasbeek]

BTW, the Greek monetary crisis supposedly was resolved today.  Can anyone explain how a country that is bankrupt can borrow its way out of insolvency???

[Michael Bush]

>Very good, MB.  Now if you'll explain how the government(s) printing fiat money enters into the equation, we'll nominate you for a Nobel Prize in economics.

In our current system they don't have to print fiat money.  They just lend it or borrow it.  It's just ones and zeros in a computer anyway.  We increased the money supply by increasing debt.  Everyone's debt.  But the Government can inject money into the system by lending it or spending it.  Increasing the money supply, of course, leads to inflation... the money has to represent something and when it doesn't it loses value.  On the other hand if you don't have money in circulation you get a depression.  As Truman always said, he wanted to find a "one handed" economist...

[NeilTheCop]

As Maggie Thatcher once said "The problem with socialism is that sooner or later you run out of other peoples money"