Global Financial Crisis

[Cherry Pro]

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.

The hotel owner takes the banknote in hurry and rushes to his meat supplier to whom he owes E100. The butcher takes the money and races to his supplier to pay his debt. The wholesaler rushes to the farmer to pay E100 for pigs he purchased some time ago.

The farmer triumphantly gives the E100 note to a local prostitute who gave him her services on credit.The prostitute goes quickly to the hotel, as she owed the hotel for her hourly room use to entertain clients. 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.

There was no profit or income. But everyone no longer has any debt and the small town people look optimistically towards their future.

Could this be the solution to the global financial crisis or, is there a catch here? I'd love to hear your comments

 

[Ausprop]

it's already been done... the yanks printed some greenbacks and bought Euros with it. they then bought some oil from Russia which is how that russian tourist got his money

 

[Kenster]

Could this be the solution to the global financial crisis or, is there a catch here? I'd love to hear your comments

Hi CP,

What your illustration shows is the flow of money, used as a mean of exchange.

Money by itself is meaningless, a piece of paper/plastic with writing on it. It is people who makes it valuable.

In reality, the value of money is founded on the level of trust. The more trust worthy a note is, the more valuable it becomes.

The speed at which money is flowing through the economy is the velocity. Problem with GFC is money velocity slows significantly when everyone tries to hoard or uses it to repay debts, bringing the economy to a grinding halt. Governments try to reverse this trend by stimuluses.

The catch?
1. Set ourself in the path of money flows
2. Learn how to make money stick to our hands
3. Do it

 

[tubs]

From a strictly accounting point of view, if you owe someone 100 Euros you have a liability of 100 euros.

But if someone owes you 100 euros, that is considered an asset.

So everyone has a 100 euro liability, but also a 100 euro asset (ie someone owes them 100 euros) so it all balances out in everyone's personal balance sheet anyway.

The note passing around simply wipes out both the asset and liability at the same time but doesn't change their overall position.

Wouldn't I be fun at a dinner party?

 

[james_w]

From a strictly accounting point of view, if you owe someone 100 Euros you have a liability of 100 euros.

But if someone owes you 100 euros, that is considered an asset.

So everyone has a 100 euro liability, but also a 100 euro asset (ie someone owes them 100 euros) so it all balances out in everyone's personal balance sheet anyway.

The note passing around simply wipes out both the asset and liability at the same time but doesn't change their overall position.

Wouldn't I be fun at a dinner party?

<----invites tubs to his next dinner party

 

[Cherry Pro]

Thanks Ausprop, Kenster and Tubs. Very interesting ..mmm.

Kenster .. any idea of how to make money stick...I'm more into money being
a constant stream

James, if your next dinner party is being held on Mars...unsure if Tubs can attend

 

[Kenster]

Kenster .. any idea of how to make money stick...I'm more into money being a constant stream

There are many how-to books on this topic.

The most note worthy is "The Richest Man In Babylon" by George Classon.

On the mindset, "Think & Grow Rich" by Napoleon Hill is number one.