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Sorry for raising this again, but I'm confused. I've just read the following on Peston's blog on the BBC website

http://www.bbc.co.uk/blogs/thereporters/ro...oaded_down.html

In a small town on the South Coast of France, the holiday season is in full swing, but it is raining so there's not much 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 100 Euro note on the reception counter, takes a key and goes to inspect the room located upstairs on the third floor.

The hotel owner quickly takes the 100 note and rushes to his butcher whom he owes 100. The butcher takes the money and races to the wholesaler to pay his debt of 100. The wholesaler rushes to the farmer to pay him 100 for pigs he purchased some time ago. The farmer triumphantly gives the 100 note to a local prostitute who serviced him on credit. The prostitute quickly goes to the hotel to pay the 100 she owes them for the room she rents by the hour to entertain her clients.

Just then, the rich Russian returns to the reception and informs the hotel owner that the room is unsatisfactory. He takes back his 100 and departs.

It is clear that there was no profit or income, but everyone in the small town no longer has any debt and they all optimistically look forward to the future
.

I'm sure there's a flaw in this somewhere, but I can't see it - can someone help me out please?

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Sorry for raising this again, but I'm confused. I've just read the following on Peston's blog on the BBC website

http://www.bbc.co.uk/blogs/thereporters/ro...oaded_down.html

.

I'm sure there's a flaw in this somewhere, but I can't see it - can someone help me out please?

this was your first mistake.

you need to start with somone who knows what is going on.

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Sorry for raising this again, but I'm confused. I've just read the following on Peston's blog on the BBC website

http://www.bbc.co.uk/blogs/thereporters/ro...oaded_down.html

.

I'm sure there's a flaw in this somewhere, but I can't see it - can someone help me out please?

farmer triumphantly gives the 100 note to a local prostitute who serviced him on credit. The prostitute quickly goes to her drug dealer to score, drug dealer uses the money to buy more drugs,the hotel owner doesnt get the 100euros.

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Sorry for raising this again, but I'm confused. I've just read the following on Peston's blog on the BBC website

http://www.bbc.co.uk/blogs/thereporters/ro...oaded_down.html

.

I'm sure there's a flaw in this somewhere, but I can't see it - can someone help me out please?

"It is clear that there was no profit or income, but everyone in the small town no longer has any debt and they all optimistically look forward to the future".

But then none of them have any money owing to them, they started off net neutral, they ended up net neutral. No Change.

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eh? RU serious? My 4 yr old could work this out!!!

Big circle of people all holding £10 notes. They all give it to the person in front of them. Russian temprarliy joins the circle with a £10 of his own. Then leaves with someone elses.

at least this one is a bit challenging.....

Three men, and they go to this hotel. There, the manager tells them that

there is only one room left. The three people share that room for thirty

dollars so each person pays ten dollars. Later the manager found out that

the room is only 25 dollars. He calls the bell boy and tells them to give

the 5 dollars back the bell boy decides that since you cannot divide 5

dollars by 3 people, so he took 2 for himself and returned to each person 1

dollar. So each person paid 9 dollars and the bell boy has a two dollars

that is 9 * 3 = 27 plus the bell boy's 2 dollars is 29 dollars. Where is

the extra dollar?

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Sorry for raising this again, but I'm confused. I've just read the following on Peston's blog on the BBC website

http://www.bbc.co.uk/blogs/thereporters/ro...oaded_down.html

.

I'm sure there's a flaw in this somewhere, but I can't see it - can someone help me out please?

Glancing quickly

There was no net debt

The situation could have been resolved without the Russian or his money, by everyone writing and swapping iou-s. At the end of the process two equal and opposite iou-s of would be held - and they would annihilate spontaneously in a puff of logic

Edited by Stars

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Glancing quickly

There was no net debt

The situation could have been resolved without the Russian or his money, by everyone writing and swapping iou-s. At the end of the process two equal and opposite iou-s of would be held - and they would annihilate spontaneously in a puff of logic

ah, that would be the fiat monetary system.

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eh? RU serious? My 4 yr old could work this out!!!

Big circle of people all holding £10 notes. They all give it to the person in front of them. Russian temprarliy joins the circle with a £10 of his own. Then leaves with someone elses.

at least this one is a bit challenging.....

Three men, and they go to this hotel. There, the manager tells them that

there is only one room left. The three people share that room for thirty

dollars so each person pays ten dollars. Later the manager found out that

the room is only 25 dollars. He calls the bell boy and tells them to give

the 5 dollars back the bell boy decides that since you cannot divide 5

dollars by 3 people, so he took 2 for himself and returned to each person 1

dollar. So each person paid 9 dollars and the bell boy has a two dollars

that is 9 * 3 = 27 plus the bell boy's 2 dollars is 29 dollars. Where is

the extra dollar?

The guests are 27 dollars down, the manager 25 up and the bellboy up 2.

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Sorry for raising this again, but I'm confused. I've just read the following on Peston's blog on the BBC website

http://www.bbc.co.uk/blogs/thereporters/ro...oaded_down.html

.

I'm sure there's a flaw in this somewhere, but I can't see it - can someone help me out please?

Yes, the net loser is the hotel, which wipes out the prostitute's debt and gives the 100Euro back to the Russian, rather than putting it into its own bank account.

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farmer triumphantly gives the 100 note to a local prostitute who serviced him on credit. The prostitute quickly goes to her drug dealer to score, drug dealer uses the money to buy more drugs,the hotel owner doesnt get the 100euros.

Another way to look at it is that the hotel forgives the debt of the prostitute who forgives the debt of the farmer .............who forgives the debt of the butcher who forgives the debt of the hotel owner.

So if you can net out debt when one debtor is also a creditor then debt dissapears. The hotel owner was both debtor and creditor

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eh? RU serious? My 4 yr old could work this out!!!

Big circle of people all holding £10 notes. They all give it to the person in front of them. Russian temprarliy joins the circle with a £10 of his own. Then leaves with someone elses.

at least this one is a bit challenging.....

Three men, and they go to this hotel. There, the manager tells them that

there is only one room left. The three people share that room for thirty

dollars so each person pays ten dollars. Later the manager found out that

the room is only 25 dollars. He calls the bell boy and tells them to give

the 5 dollars back the bell boy decides that since you cannot divide 5

dollars by 3 people, so he took 2 for himself and returned to each person 1

dollar. So each person paid 9 dollars and the bell boy has a two dollars

that is 9 * 3 = 27 plus the bell boy's 2 dollars is 29 dollars. Where is

the extra dollar?

Er they each paid $9 ($10 - $1 change), so in total they paid $27; $25 with the manager, $2 with the bell boy.

(I didn't google this - honest)

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Sorry for raising this again, but I'm confused. I've just read the following on Peston's blog on the BBC website

http://www.bbc.co.uk/blogs/thereporters/ro...oaded_down.html

.

I'm sure there's a flaw in this somewhere, but I can't see it - can someone help me out please?

I own you 100 quid and you own me 100 quid - neither of us has a 100 quid note - so he telling me that we cannot call it quits without someone comming up with a 100 quid note or printing money?

Peston is working to an agenda and thats all that needs to be said.

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Sorry for raising this again, but I'm confused. I've just read the following on Peston's blog on the BBC website

http://www.bbc.co.uk/blogs/thereporters/ro...oaded_down.html

.

I'm sure there's a flaw in this somewhere, but I can't see it - can someone help me out please?

The hotelier not only passes the money on, he also gives it back therefore gets screwed.

The hotelier is us, the tax payer.

<<edit thank fck other posters saw it >> i think pestons trying to write allegories.

Edited by slurms mackenzie

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Two people either side of a desk, one has some goods, one has a wallet full of money, they exchange the goods for the money and then change their mind, again and again and again Eventually they decide that they would both like to leave the table in the same situation as they arrived. Net change, none. Net growth and productivity zero. The velocity of money has been very great indeed.

Put a tax man at the end of the table who considers these as commercial transactions, he has a field day and leaves the table with all the money.

:lol:

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Two people either side of a desk, one has some goods, one has a wallet full of money, they exchange the goods for the money and then change their mind, again and again and again Eventually they decide that they would both like to leave the table in the same situation as they arrived. Net change, none. Net growth and productivity zero. The velocity of money has been very great indeed.

Put a tax man at the end of the table who considers these as commercial transactions, he has a field day and leaves the table with all the money.

:lol:

How true sir!

Anyone for a 3 bed semi?

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They are going to print into infinity.

Mathematically impossible, come on injun! I thought better of you. Edit -> Unless your point is the hotelier has a natty lexmark and gives the russion some dodgy cash, ooooh i like it!

Edited by slurms mackenzie

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Mathematically impossible, come on injun! I thought better of you. Edit -> Unless your point is the hotelier has a natty lexmark and gives the russion some dodgy cash, ooooh i like it!

The 100 into out little economy is an addition to the money supply.

What is being suggested is the mythical add to money supply, then subtract from money supply after the debts are cleared inflationary gambit.

It's never, ever worked out like that. Ever.

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He doesn't understand the difference between a 'loan' and 'extending credit', which is criminal given the influential platform he has been given.

Oridnary people and businesses loan money to each other. This operates in the way most people think of (e.g I give you £20 out of the money I currently have in my pocket with the expectation of receiving it back) and this is what is desrcibed in the example in the OP.

However most of the money 'owed' isn't owed to ordinary people and businesses. It is owed to banks who do not loan money. They extend credit which is the creation something new (new credit). This is accounted for completely differently than a true loan of something, which is transfering something that already exists to another person.

When the credit extended is paid off (i.e someone makes a repayment on their bank 'loan') this permanently destroys the money that is used to 'pay it off'. It cannot cycle through the economy once it is used to pay off a bank 'loan' because it is destroyed due to the manner in which this paying off is accounted for.

Therefore the example quoted in the OP is incorrect in that it tries to pretend that the same £100 can be used to pay down many debts in the real world. This is not possible because the majority of 'loans' are in extensions of credit which destroy the money used to pay them off. However if the majority of 'loans' in the real world were 'true loans' between non-bank individuals and businesses then the example would be valid.

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