Debt; Humorous Anecdote

Saw this on another forum, but it was too good not to pass along...

"It's a slow day in the small town of Pumphandle and the streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night. As soon as he walks upstairs, the motel 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 to his supplier, the Co-op.

The guy at the 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 "services" on credit.

The hooker rushes to the hotel and pays off a room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything. At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.

No one produced anything. No one earned anything. However, the whole town now thinks that they are out of debt and there is a false atmosphere of optimism and glee."

Besides the Python-esque humor, there's probably something in the story to be learned, I'm sure.

That takes some thinking about.
Still trying to get my head around it

That's just the circulation of money.

The fact that its just one $100 bill doing all the work is what makes it counter-intuitive

If any one of those owed money to the Bank then the whole process would have stopped, since the Bank would have kept it, since they are not lending to anybody

Good tale though

louishen said:

That's just the circulation of money.

The fact that its just one $100 bill doing all the work is what makes it counter-intuitive

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This ^

XJ-linux said:

No one produced anything. No one earned anything. However, the whole town now thinks that they are out of debt ...

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They are, or at least the residents involved are.

docx said:

That takes some thinking about.
Still trying to get my head around it

Click to expand...

So, in this case - everyone is paid off, as described.

As a result of the visit by the tourist, the hotel owner is no worse off and no better off.

Ignoring all other assets and liabilities that MAY be involved - the owner:

Debits $100 in liabilities (the A/P to the butcher)
Debits $100 in assets (the A/R from the hooker)

There is no net change in his balance sheet, but his books have become a bit simpler to deal with.

In fact, this is true for everyone else who got the $100 as well, except for them, they clear the A/R first, and then the A/P. In fact, the entire town could have gotten together and figured out who owed who what, and performed a "clearinghouse" function to cancel out debt as appropriate for all their cross-compatible debts, without involving any cash at all.

No one produced anything. No one earned anything.

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This part is entirely untrue. Something was produced and money was earned in each of the transactions that led to the debt that got paid off.

However, the whole town now thinks that they are out of debt and there is a false atmosphere of optimism and glee

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With respect to the debt described, they are out of debt, and no longer paying any interest that may have been associated with it. This is definitely something to be happy about and there is nothing at all "false" about it.

On a related note, the hotel operator is dumb. He should be bartering hotel room use for her services - and more than he would get if paying cash. Her business relies on his, his does not rely on hers - he should be taking advantage of this fact.