Economics 101

[Gregory Matthews]

 

Folks, the following was sent to me by a friend.  I found it interesting.  I Know people who subscribe to it, and want to so order their lives.  Can you relate this to economic reality?

It's a slow day in the small Saskatchewan town of Pumphandle, and the streets are deserted. Times are tough. Everybody is in debt and living on credit. A tourist visiting the area stops at a 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 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.

[dgrimm60]

GREGORY

this  is  a  cute  and  funny  story

dgrimm60

[Gregory Matthews]

Take a close look at it.

As the story begins, the motel owner is owed a debt by  person who did not pay their hotel bill.

At the end of the story, the person who owed the motel debt, has paid it off.    But, the motel owner now owes a $100 debt to to person who checked out the upstairs rooms.  The motel owner is not better off.  Rather, the motel owner is worse off by $100.

 

[Dr. Shane]

Didn't the motel owner "borrow" the $100 from the guest and later (after the prostitute paid her bill) the motel owner paid the guest back?

[Gregory Matthews]

Check it out Shane.  When the guest came. In the motel owner was owed $100.   And the motel owner owed no one.  At the next step the motel owner was still owed $100 and he owed the guest $100 and he has the $100 in reserve to pay that guest.  So at that point in time, the motel owner was $100 to the good, due to the debt owed to him.  In the last step he is not owed $100.  He has used the reserve to pay the guest.  In short he is worse off by $100 than he was in the beginning.  He does not owe anyone.  He dose not have any reserve.  No one owes hem anything.  His net worth has decreased by $100.