Many people find it hard to follow the arcane arguments of economists. One reason for this is that economists today are in the same position as astrologers before the discipline of astronomy got its act together: what they say to explain and predict events makes a lot of sense given what we know about the world, and we have no better guide than the theories that they apply, but they do not in fact have much of a clue about what is really going on, for which reason much of what they say does not make much sense.
So it makes a pleasant change when an economic intervention is simple enough in principle to be explained in terms that a more or less sane and intelligent human being can understand. What follows is a re-telling of something a member of the German Financial Community recently sent me by email, origin unknown:
The Greek Rescue Package
It is a cold and rainy winter day in a small Greek village. No tourists have arrived, the streets are empty, times are hard, everyone is in debt and worried about what tomorrow may bring. A hired BMW pulls up in front of an empty hotel, and a German tourist gets out. He tells the hotelier he wants to look at the rooms to see if he would like to stay there. The hotelier gives him the keys in return for a deposit of €100, which the tourist leaves on the counter.
As soon as the tourist has disappeared up the stairs, the hotelier grabs the bank-note and runs to his neighbour, the butcher, to pay his debts.
The butcher takes the €100, runs down the road and pays his debts to the farmer.
The farmer takes the €100 and goes around the corner to his friend in the local farmers' cooperative to pay off his debts.
The man from the cooperative takes the €100, runs to the café, and pays off his bar tab.
When he has gone, the landlord pushes the note across the counter to the village whore, who has been going through difficult times and has done him a few 'favours' on credit.
The prostitute runs up the road to the hotel and uses the €100 to pay her last bill.
The hotel owner puts the €100 note back on the counter, just as the tourist comes down the stairs. He says he doesn't fancy any of the rooms, takes his €100, and leaves.
- No-one produced anything.
- No-one earned anything
- Everyone has paid off their debts and looks to the future with confidence and optimism.
And that is how simple a fiscal rescue package can be.
What is not simple is finding the source of story like this once it has gone viral and been reposted all over the Intarwebs. My best informed guess is that it was posted without reference to any rescue package by 'Methodikus' on March 10, 2009 in a general discussion about the nature of money.