I GOT this in my e-mail inbox just now. †I am sure you will find it funny and entertaining as well as provocative. †Just as the question at the end of the narrative is asking, could this simplistic “money cycle” scenario offer a solution to financial turmoils besetting world economies just like the one we are experiencing these days? †Of course we are all aware that the real world of Economics and Finance is so much more complicated than this. †Still it begs the question, “Is this really possible?” doesn’t it?
-o0o-
It’s all about Money!
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It is August. In a small town on the South Coast of France, holiday season is in full swing, but it is raining so there is not too much business happening. Everyone is heavily in debt. Luckily, a rich Russian tourist arrives in the foyer of the small local hotel. He asks for a room and puts a Euro100 note on the reception counter, takes a key and goes to inspect the room located up the stairs on the third floor.
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The hotel owner takes the banknote in hurry and rushes to his meat supplier to whom he owes E100.
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The butcher takes the money and races to his wholesale supplier to pay his debt.
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The wholesaler rushes to the farmer to pay E100 for pigs he purchased some time ago.
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The farmer goes quickly to the hotel, as he owed E100 the hotel for using hotel room for some family function in past.
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At that moment, the rich Russian is coming down to reception and informs the hotel owner that the proposed room is unsatisfactory and takes his E100 back and departs.
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There was no profit or income. But everyone no longer has any debt and the small town people look optimistically towards their future.
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Could this be the solution to the Global Financial Crisis?
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interesting, the story forgot to consider stuff like interest and taxes amongst others.