How a tourist makes a whole town happy.
A tourist enters a hotel; he needs a room. He puts 100€ on the counter but first he wants to have a look at the rooms. As soon as the tourist is out of sight, the hotel manager runs to the butcher to pay back some debts. The butcher happily uses the 100€ to pay an invoice for drinks at the local bar. The barkeeper gives the money to a woman who regularily offers special services to him. The prostitute happily takes the 100€ and runs over to the hotel to pay back her debts for rooms. She puts the 100€ on the counter just in time for the tourist to come down the stairs. The tourist says that he likes none of the rooms. He takes his money and leaves.
What remains is a peaceful town without debt.
The problem with this cute story is that the town didn't have any debt in the first place.
ReplyDeleteEvery person had an offsetting asset to match the debt. All the money did was to act as a clearing mechanism to remove the debts and assets from the books. The townspeople could have just done the same thing without the money, just by transferring the debt owed directly.
Haven't you ever had a group of friends where I owe Dave $10, Sally owes me $10, so I just say that Sally now owes Dave $10? Transactions like that were pretty common among my group of friends in university.
I actually wrote an Excel script some time ago to calculate the process to satisfy all friends while minimizing the amount of transactions ;). Extremely useful - not only at university.
DeleteSo, you are correct. I guess the problem is really only a problem if the train of debt is very long and nobody oversees it.
What if everyone in that town is instead in debt to the same entity and the customer gets back in time to notice that his money is missing ans sues them for even more?
ReplyDeleteA customer that puts $100 on a desk just to see a room? I doubt this customer is smart enough to sue someone. :)
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