[Sooty25]

it's all one big perpetual Ponzi scheme

[Flyingfemme]

It's a bit like the old story,

It’s a slow day in some little town……..
The sun is hot….the streets are deserted.
Times are tough, everybody is in debt, and everybody lives on credit.
On this particular day a rich tourist from back west is driving thru town.
He stops at the motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night.
As soon as the man walks upstairs, the 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 at the feed store.
The guy at the Farmer’s Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her services on credit.
She, in a flash rushes to the motel and pays off her room bill with the motel owner.
The motel proprietor now places the $100 back on the counter so the rich traveler will not suspect anything.
At that moment the traveler comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money & leaves.

NOW,… no one produced anything…and no one earned anything…however the whole town is out of debt and is looking to the future with much optimism.

[Sooty25]

do you know something about @The Farmer that we don't?

[CloudHound]

Wrong!

The Hooker’s debt was not paid into the till so the Hotelier is still out of pocket.

[low&slow]

The hotelier has paid his butcher's bill so he's already benefitted.

In reality this is exactly how an economy works. It's wrong to say "no one produced anything…and no one earned anything" because everybody has done their job, ie the hotelier has provided a room, the butcher meat, the pig farmer has grown pigs, etc. They don't need the rich tourist's $100 bill, all they needed was for each person to give their creditor an IOU, some judicious swapping of IOUs would then cancel all the IOUs and "whole town is out of debt and is looking to the future with much optimism."

[Flying_john]

You forgot the tax that should have been taken off of each payment as it went round, but maybe in the wild west this wasn't of concern.

But its exactly what the Guvmint want to encourage, as at every step there is a tax revenue and the faster this happens the more money goes into the treasury to pay for public service wages.

[low&slow]

Well, if the pro rents the room for $100 and then sells her services for $100 she's not making much of a profit, so presumably the debts are only part of the transactions.

[johnm]

That's not a bad model for what is called debt rollover. Paying the principle back is of no importance as long as the interest is manageable and that's what HMG is banking on at this point.

[Flyingfemme]

ISTR, in the dim and distant, something called a “travelling cheque” in housebuying chains. Where the person at the top agrees a discount on their sale price on condition that everyone in the chain does the same. A couple of thousand quid makes very little difference on an expensive property, everyone in the middle breaks even and the guy at thebottom gets a discount that is much larger in percentage terms and can make a real difference.
Maybe something like this could relieve a bit of global pressure on poorer countries for a small expense to the richer ones? Of course, you’d need the Chinese to play ball since they seem to own a lot of everything these days.

[Pete L]

This works only in a truly circular economy and when everyone is roughly equally economically active. Mediaeval villages and a small business community probably conform quite closely which is why local currencies nearly work in relatively isolated places like Lewes.

In the real world you have rent seeking behaviour - essentially slavery reinvented - and international imbalances pushing inflation. It's not visible at the moment but only the USA currently can devalue its own debt indefinitely since it's the only reserve currency - this is the real reason the UK is not in the euro - it would have created a genuine alternative to the dollar as a reserve currency and forced the USA to pay its bills.

[oldbiggincfi]

I'm glad I asked the question.

It always seemed like " The airfield Fiver "

[Pete L]

A fiver's a lot of money to be floating round the average airfield but I should have guessed from the username

[low&slow]

That's not a bad model for what is called debt rollover. Paying the principle back is of no importance as long as the interest is manageable and that's what HMG is banking on at this point.

No, the Flyingfemme story is not about debt rollover, it is normal economic activity.

Debt rollover is when a debtor borrows more money to repay the principal of a debt that has become due; this story is an illustration of how we spend our working lives using our time & skills producing something that someone else is prepared to pay for, ie swap their time & skills for yours. If the hotel was adequately financed the hotelier would have paid the butcher in cash, the butcher passed the money on to the farmer and so on, until the pro paid the hotelier. Doing it on tick is just the same; after swapping IOUs around each person would own their own IOU & tear it up. The rich tourist and his $100 bill is a MacGuffin, there to make the story more interesting.

[Charles Hunt]

Wrong!

The Hooker’s debt was not paid into the till so the Hotelier is still out of pocket.

You spotted that quickly, didn't expect you to be expert in brothenomics.

[kanga]

..money goes into the treasury to pay for public service wages.

Or, to put it another way, to pay for the public services which the citizens expect to be there ?

(Which require public servants, often on low wages and risking and sometimes losing their physical and mental health and sometimes lives to deliver )