Slow day in a little Greek Village

MacCLS500

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The rain is beating down and the streets are deserted.
Times are tough, everybody is in debt, and everybody lives on credit.
On this particular day, a rich German tourist is driving through the village, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.
The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.
The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.
The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.
The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the taverna.
The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit.
The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.
The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything.
At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything.
No one earned anything.
However, the whole village is now out of debt and looking to the future with a lot more optimism.
And that, Ladies and Gentlemen, is how the bailout package works
 

martyz

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except the poor old hotelier cant recover a debt for £100.....
 

renault12ts

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Yes...now I remember:

The Hotel owner made E100. He wiped his debt.

Whether the tourist stayed or did not stay, the E100 did the job.

You could say if he'd stayed then the Hotel owner would have made E200.

The loser was the tourist...he should have been paid interest.
 

Harrythedog

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If the tourist had took longer inspecting the rooms could the e100 note have gone around again buying e100 of credit at each profession?
 

renault12ts

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That's what I was going to say, the hotelier is still £100 down
He owed 100, and was owed 100...all square. He no longer owes 100, nor is owed 100. Whether the tourist stays or not is immaterial.
 

artyman

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Ok so should we join the Euro then :D
 

Markedes

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Superb Analogy :)

Regards
 

Melk63

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Not quite... In this story, everyone owes and is owed the same amount of €100. That means theoretically everyone has a net balance sheet of zero. Altogether therefore they have a net zero balance sheet. In real world however the nations of Greece, Italy, etc. have a vast negative balance sheet, made up of each individual, either personally or through their government sovereign debt, has build vast debt burdens. You cannot wipe that out with cash injection alone. They have to create wealth first through growth. Just a thought... Mel.
 

Markedes

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That's because on this occasion the rich German was in a go anywhere "Mercedes AMG G WAGON" and dealt with the issue quickly.

On previous bailout the "Trabant" broke down on route, thus debt increased :)
 

NOMONEYBUTAMERC

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Great analogy . Whichs leads me to wonder whether , if every debt in the world was called in tomorrow , would there actually be any money left ?
 

Red C220

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If you look at who owes whom on the below link, the OP's tale makes a whole lot of sense.

BBC News - Eurozone debt web: Who owes what to whom?
Great graph designed for economic buffoons like me.

Now all I need is someone to explain why we can't all have a bit of tidy up here.

i.e. Ireland owes UK £104.5 bananas

UK owes ireland £113.5 bananas

Net result - UK owes Ireland £9 bananas.

Chump change! The Dragons have that sat on the coffee tables next to them in £50's.

Can someone explain (in baffoon terms) why they can't actually do this?
 

artyman

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Great graph designed for economic buffoons like me.

Now all I need is someone to explain why we can't all have a bit of tidy up here.

i.e. Ireland owes UK £104.5 bananas

UK owes ireland £113.5 bananas

Net result - UK owes Ireland £9 bananas.

Chump change! The Dragons have that sat on the coffee tables next to them in £50's.

Can someone explain (in baffoon terms) why they can't actually do this?
Because lot's of Quangos would be redundant and the attendent Social Security costs would cripple the economy :D
 

312 Sprinter

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Now one of the people involved decides to use the services of a bank to pay their bill. The bank takes a commission and the manager gets a bonus for generating new business. The money doesn't pass back into the local economy. All the hotelier gets back is 75 Euros and he has a financial crisis on his hands.
 

Markedes

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So when the next rich German turns up, the Hotelier makes the price 135 Euros to cover the bank costs and 10 euro in his pocket, pricing everyone out of going to Greece.
 

Markedes

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It's a cultural thing. He does not pay tax ..... Hence the problem :) and Tourism suffers due to sky high prices and the wheel of debt continues.
 

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