How the economy works

[Guest Gary Loughran]

Just pasting as it was sent to me - I'm sure this applies world wide

It is the month of June; a resort town sits next to the shores of a lake. It is raining, and the little town looks totally deserted.

It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 dollar bill and runs to pay his debt to the butcher.

The Butcher takes the 100 dollar bill, and runs to pay his debt to the pig raiser.

The pig raiser takes the 100 dollar bill, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 dollar bill and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit.

The hooker runs to the hotel, and pays off her debt with the 100 dollar bill to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 dollar bill back on the counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 dollar bill, after saying he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism

And that, ladies and gentlemen, is how the United States Government is doing business today.

Ain't life wonderful!!!!

[John Simkin]

Just pasting as it was sent to me - I'm sure this applies world wide

It is the month of June; a resort town sits next to the shores of a lake. It is raining, and the little town looks totally deserted.

It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 dollar bill and runs to pay his debt to the butcher.

The Butcher takes the 100 dollar bill, and runs to pay his debt to the pig raiser.

The pig raiser takes the 100 dollar bill, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 dollar bill and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit.

The hooker runs to the hotel, and pays off her debt with the 100 dollar bill to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 dollar bill back on the counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 dollar bill, after saying he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism

And that, ladies and gentlemen, is how the United States Government is doing business today.

Ain't life wonderful!!!!

I have a friend who has an economics degree from Cambridge University. I asked her why during the height of the credit-squeeze crisis the focus was on inter-bank lending. Why didn't the banks just concentrate on lending direct to its customers? She explained that the banking system is all based on a "confidence trick". That the banks do not have the money in its vaults to actually lend to people. Therefore, they take it in turns to lend money to each other so that they can lend to their customers. If everybody demanded their savings from the banks at the sametime, all the banks would collapse. That is how we could actually bring down the capitalist system. Not that it would be in our interests to do so.

[Guest]

That is how we could actually bring down the capitalist system. Not that it would be in our interests to do so.

Two interesting observations. The first one would take some coordination.

Not sure why however the perpetuation of the capitalist system is suddenly in 'our interests'.

Have you recently inherited a factory??

[Terry Mauro]

Just pasting as it was sent to me - I'm sure this applies world wide

It is the month of June; a resort town sits next to the shores of a lake. It is raining, and the little town looks totally deserted.

It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 dollar bill and runs to pay his debt to the butcher.

The Butcher takes the 100 dollar bill, and runs to pay his debt to the pig raiser.

The pig raiser takes the 100 dollar bill, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 dollar bill and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit.

The hooker runs to the hotel, and pays off her debt with the 100 dollar bill to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 dollar bill back on the counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 dollar bill, after saying he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism

And that, ladies and gentlemen, is how the United States Government is doing business today.

Ain't life wonderful!!!!

Forum member Anton Chaitkin wrote the following back in 1985. Henry Clay warns his countrymen of the dangers of rejecting the American System for British Free Trade.

Henry Clay:

National Development Must Take Precedence Over Debt Payments

by Anton Chaitkin

http://american_almanac.tripod.com/hclay.htm

It is not the US Government who is the real culprit. The real culprit is Free Trade, a cancerous policy that has dominated the United States economy since the assassination of "American System" President John F. Kennedy.

Who killed JFK?

[John Simkin]

Not sure why however the perpetuation of the capitalist system is suddenly in 'our interests'.

Have you recently inherited a factory??

Unless capitalism was overthrown by a socialist revolution I fear we would get a fascist state.

[Evan Burton]

I think it's a wonderful story, and sort of suits my simplified financial thinking. I can see an immediate flaw, though. What if the feed supplier paid off his bill to a larger merchant in another town? Immediately there is a problem.

Is that justification for a world economy? Do we have a world economy? As I have said on numerous occasions, I am a financial numpty and anyone else is more qualified than me to speak on these matters.

[William Kelly]

I think it's a wonderful story, and sort of suits my simplified financial thinking. I can see an immediate flaw, though. What if the feed supplier paid off his bill to a larger merchant in another town? Immediately there is a problem.

Is that justification for a world economy? Do we have a world economy? As I have said on numerous occasions, I am a financial numpty and anyone else is more qualified than me to speak on these matters.

You make a good point Evan.

This is especially true in regards to such mega store businesses as Wall Mart, who create a few dozen jobs, but then put a half dozen small, local, family businesses - out of business, and they take all of their profits out of the community, out of the state.

Why not spend a few more bucks and buy from the neighborhood hardware store, pharmacy, sporting goods, deli, etc., and keep your neighbors in business?

BK

[Evan Burton]

I think it's a wonderful story, and sort of suits my simplified financial thinking. I can see an immediate flaw, though. What if the feed supplier paid off his bill to a larger merchant in another town? Immediately there is a problem.

Is that justification for a world economy? Do we have a world economy? As I have said on numerous occasions, I am a financial numpty and anyone else is more qualified than me to speak on these matters.

You make a good point Evan.

This is especially true in regards to such mega store businesses as Wall Mart, who create a few dozen jobs, but then put a half dozen small, local, family businesses - out of business, and they take all of their profits out of the community, out of the state.

Why not spend a few more bucks and buy from the neighborhood hardware store, pharmacy, sporting goods, deli, etc., and keep your neighbors in business?

BK

Bill,

I don't have a clue, but what you say makes sense to me. I try to buy from my indy grocer. I try to buy fuel from an indy outlet. If I can keep a local business employed, I'll do so.

Edited August 7, 2009 by Evan Burton
spelling correction

[John Dolva]

Reminds me of visiting NY. (after Washington photographing the largest anti war demo for some time, I started photographing the cops with my dig cam, which suddenly stopped working, (did they flash it? I dont know), anyway a replacement was necessary). So, in NY (staying at a cheap joint in an alley off 42nd St) I set about finding a replacement.

I went to a number of camera shops. In one the proprietor tried his best. A 350$ camera, (as I edged towards the door), dropped in price to 130. What an a..hole. Trying to sell me a 350$ camera when he'll still make a profit on 130? Stuff that. So I went to Montreal and bought 570$ one instead.

[Guest]

Not sure why however the perpetuation of the capitalist system is suddenly in 'our interests'.

Have you recently inherited a factory??

Unless capitalism was overthrown by a socialist revolution I fear we would get a fascist state.

Fascist states do emerge during crises of capitalism precisely to protect and perpetuate capitalist social relations of production. Marx himself identified a proto fascist state as early as 1852 with the regime of Louis Napoleon (18th Brumaire)

However I still can't see any logic in the argument that capitalism either liberal or dictatorial can ever be on 'our interests'.

[Craig Lamson]

Reminds me of visiting NY. (after Washington photographing the largest anti war demo for some time, I started photographing the cops with my dig cam, which suddenly stopped working, (did they flash it? I dont know), anyway a replacement was necessary). So, in NY (staying at a cheap joint in an alley off 42nd St) I set about finding a replacement.

I went to a number of camera shops. In one the proprietor tried his best. A 350$ camera, (as I edged towards the door), dropped in price to 130. What an a..hole. Trying to sell me a 350$ camera when he'll still make a profit on 130? Stuff that. So I went to Montreal and bought 570$ one instead.

Why does trying to get the best price possible for his product make a person an a-hole? I just don't understand your logic, given capitalism worked perfectly this case.

You had the option to accept the lower price or DECLINE to purchase and purchase elsewhere,which you did at an even higher price.

Do you even know the proffit margin the dealer made on your 570 dollar cammera?

[Craig Lamson]

I think it's a wonderful story, and sort of suits my simplified financial thinking. I can see an immediate flaw, though. What if the feed supplier paid off his bill to a larger merchant in another town? Immediately there is a problem.

Is that justification for a world economy? Do we have a world economy? As I have said on numerous occasions, I am a financial numpty and anyone else is more qualified than me to speak on these matters.

You make a good point Evan.

This is especially true in regards to such mega store businesses as Wall Mart, who create a few dozen jobs, but then put a half dozen small, local, family businesses - out of business, and they take all of their profits out of the community, out of the state.

Why not spend a few more bucks and buy from the neighborhood hardware store, pharmacy, sporting goods, deli, etc., and keep your neighbors in business?

BK

I hear people state this all the time, but is it always true?

Case in point. I worked in a very small towm for two decades. Population 31,000

When the first big box came to town, a home improvement store, people said that was the end of the local hardware and lumberyard. Neither was true. Both the hardware store in downtown and trhe family owned lumberyard are still doing fine (but slower now that unemployment has hit 17%

In fact the big box store created a strip mall and half a dozen new locally owned businesses were started in those stores.

Then Walmart came to town and the cries went up again. Yet the local, family owned grocery is still in business, thriving because they changed their business model and decided NOT to be the lowest price but rather offer things and services Walmart could not. The peple who sell cloting and housewares are still in business downtown, as always.

And that Walmart store, situated all alone on the outskirts of town is now surrounded by at least 30 new, locally owned businesses.

And we have not even touched on the employee of Walmart compared to a employee of a mom and pop....

Edited August 7, 2009 by Craig Lamson

[John Dolva]

Reminds me of visiting NY. (after Washington photographing the largest anti war demo for some time, I started photographing the cops with my dig cam, which suddenly stopped working, (did they flash it? I dont know), anyway a replacement was necessary). So, in NY (staying at a cheap joint in an alley off 42nd St) I set about finding a replacement.

I went to a number of camera shops. In one the proprietor tried his best. A 350$ camera, (as I edged towards the door), dropped in price to 130. What an a..hole. Trying to sell me a 350$ camera when he'll still make a profit on 130? Stuff that. So I went to Montreal and bought 570$ one instead.

Why does trying to get the best price possible for his product make a person an a-hole? I just don't understand your logic, given capitalism worked perfectly this case.

You had the option to accept the lower price or DECLINE to purchase and purchase elsewhere,which you did at an even higher price.

Do you even know the proffit margin the dealer made on your 570 dollar cammera?

Well, I'm not going to bother explaining the first.

I don't care what the profit margin was.

[Craig Lamson]

Reminds me of visiting NY. (after Washington photographing the largest anti war demo for some time, I started photographing the cops with my dig cam, which suddenly stopped working, (did they flash it? I dont know), anyway a replacement was necessary). So, in NY (staying at a cheap joint in an alley off 42nd St) I set about finding a replacement.

I went to a number of camera shops. In one the proprietor tried his best. A 350$ camera, (as I edged towards the door), dropped in price to 130. What an a..hole. Trying to sell me a 350$ camera when he'll still make a profit on 130? Stuff that. So I went to Montreal and bought 570$ one instead.

Why does trying to get the best price possible for his product make a person an a-hole? I just don't understand your logic, given capitalism worked perfectly this case.

You had the option to accept the lower price or DECLINE to purchase and purchase elsewhere,which you did at an even higher price.

Do you even know the proffit margin the dealer made on your 570 dollar cammera?

Well, I'm not going to bother explaining the first.

I don't care what the profit margin was.

You don't care what the profit margin was for the dealer for your actual purchase but you are upset that you think the first dealers profit marign was too high and he was wrong for trying to get the maximum price possible for the product he was selling?

Logic????

[John Dolva]

Reminds me of visiting NY. (after Washington photographing the largest anti war demo for some time, I started photographing the cops with my dig cam, which suddenly stopped working, (did they flash it? I dont know), anyway a replacement was necessary). So, in NY (staying at a cheap joint in an alley off 42nd St) I set about finding a replacement.

I went to a number of camera shops. In one the proprietor tried his best. A 350$ camera, (as I edged towards the door), dropped in price to 130. What an a..hole. Trying to sell me a 350$ camera when he'll still make a profit on 130? Stuff that. So I went to Montreal and bought 570$ one instead.

Why does trying to get the best price possible for his product make a person an a-hole? I just don't understand your logic, given capitalism worked perfectly this case.

You had the option to accept the lower price or DECLINE to purchase and purchase elsewhere,which you did at an even higher price.

Do you even know the proffit margin the dealer made on your 570 dollar cammera?

Well, I'm not going to bother explaining the first.

I don't care what the profit margin was.

You don't care what the profit margin was for the dealer for your actual purchase but you are upset that you think the first dealers profit marign was too high and he was wrong for trying to get the maximum price possible for the product he was selling?

Logic????

Ok, i will bother explaining (?) ...

I certainly wasn't upset about the first dealers margin being too high. It was the experience of trying to get out of there with a statement I'd think about it (350) ie he was a legalised thief, (which is what one would expect for sure)., and finding his love for my money presented me with a product that was worth less than the eventual 130, by then I escaped.. His business wasn't one I'd seed my money into.

It was pleasure doing business in Montreal.