Results 1 to 2 of 2

Thread: How stimulus Works

  1. #1
    Veteran Member
    Joined
    Sep 2005
    Posts
    426
    Thanks
    0
    Thanked 9 Times in 9 Posts

    Default How stimulus Works

    It is the month of August, a resort town sits next to the shores ofa lake. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives oncredit.

    Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspectthe rooms upstairs in order to pick one.

    The hotel proprietor takes the 100 dollar bill and runs to pay hisdebt to the butcher. The Butcher takes the 100 dollar bill, and runs to pay his debt tothe 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 topay his debt to the town's prostitute that in these hardtimes, 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 that 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.

    That's Economic Stimulus 101 for you. Many clueless idiots running shady web-sites assume that currency is wealth. No, It is just a tool to grease the economy. It is about Liquidity. In a service based economy, it is even more true. The ultimate wealth destroyer is FEAR. Yet cluesss idiots running shady web-sites supply it in abundance and indulge in Financial Terrorism.

    Of course, unlike the story, it is very difficult for Fed to place the $Bill at the right time & to take it away at the right time. But any attempt towards that is million times better than fear mongering which seem to run rampant in media these days.

    I would rather Fed print money than print fear......

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: How stimulus Works

    ^^^ yes this concept is applicable, providing that every single person in the town is deeply in debt and has no actual assets / investments subject to devaluation ! Unfortunately, at some point, someone had to invest / lend money to the hotel, the pig farm etc. and will take a loss as more and more freshly printed money is placed in circulation. Thus when the hotel owner needs to borrow more money to repair a leaky roof, or the pig farmer needs to borrow money next year to purchase livestock feed to raise a fresh litter of piglets, the investors / lenders are likely to say 'no way'.

Similar Threads

  1. A Stimulus Clunker
    By Eric Stoner in forum Dollar Den
    Replies: 1
    Last Post: 09-13-2010, 03:38 PM
  2. Stimulus Package explained ...
    By Melonie in forum Dollar Den
    Replies: 44
    Last Post: 03-02-2009, 11:28 PM
  3. I never got my stimulus check!
    By Laylalust in forum The Lounge
    Replies: 7
    Last Post: 07-27-2008, 06:05 PM
  4. Stimulus Check
    By AzAzn in forum Dollar Den
    Replies: 28
    Last Post: 06-18-2008, 09:09 AM
  5. Replies: 11
    Last Post: 08-11-2005, 08:37 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •