A forward but thought provoking –
It is August. 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?
PS: It isn’t a new solution but something which has been in play for centuries. The only difference in game at this stage is that the owners of game have changed and new owners aren’t ready to play by old rules but old owners are equally adamant. Someone will have to continue the game.
I would like to try…….
Debt wiped off is The Only Succor in this Scenario –
NEGATIVE – NO REAL CONSUMPTION HAS HAPPENED – i.e. No Fresh Demand because of the Injection of E100.
a) ve Mood (small town people look optimistically towards their future), resulting in Spurt in Consumption on Credit. What happens if the Next Russian opts to stay (be a consumer of E100 worth services)? For the Economy to have grown in the real sense, the overall debt in the system should be less than E100.
b) –ve Mood (As they do not want to get into debt to the order of E100 – Consumption would be more rational, hence the period in which the Dept of E100 would develop in the system would be longer. Signifying that there still would be debt, but if the rate of Incoming Russian Tourists remains same, and let’s say the period in which the Dept of E100 is developed is double this time, then there would a Net Gain to the Economy of this Small town on the South Coast of France and the Wiping of the Dept would be real and relatively more permanent. (Balance of Payment would be ve)
Thanks and Regards,
Akhilesh