Stimulus....


#1

So here is a little piece I saw just now. It was passed on and the person passing it on couldn’t give credit and as a result, neither can I. As always I’m interested to hear from those that think differently than I do…

Care to share your thoughts on this?


Stimulus Story

It is the month of August, on the shores of the Black Sea. 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 Euro note on the reception counter and goes to inspect the rooms upstairs in order to pick one.
The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.
The butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.

The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of feed and fuel.
The supplier of feed and fuel takes the 100 Euro note 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 Euro note 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 Euro note 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 Euro note, after saying that 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.


#2

My inclination is that the Hotel owner was actually stealing, as it wasn’t his money when he gave it away. The $100 didn’t produce anything of value nor did it employ any services as the man who put it on the counter never acctually spent it.
Having said that, it’s still interesting if you think about it.

I think the moral of the story is, if everyone’s debt drops simultaneously everyone is better off regardless of how it’s accomplished…


#3

I was also thinking that it was a story on how the trickle down theory works. I know dems hate that theory because you can’t “prove” how people benefit from what the rich do with their money. It’s much easier to take from the rich (actually middle class) & give it directly to social programs…that is obvious. Showing how jobs are created with investment money is almost impossible unless you do it like the government does.


#4

If Donald Trump takes 30 friends out to dinner and treats them to an expensive meal and wine–say $10,000–that APPEARS to be “conspicuous consumption” and is looked down on by the left as “wasteful.” Where does that $10K ACTUALLY go, however? It pays the salaries of the chef and his assistants, the waiters, wine steward, the butcher and green grocer the delivery truck driver, farmers and yes, even the restaurant owner.


#5

I totally agree. Heck I would also point out that the $10,000 he spent is a smaller percentage of his income than me paying for a $20 meal on my income.


#6

I can’t speak for something as nebulous as “the left”, but I don’t think the spending is really the issue. Having said that, I agree with you that his consumption is good for all who are employed in his spending. If I were to play devils advocate for you (as I so often do), the real issue is, how did someone come to have so much money that they can afford to pay 1 months salary (per person) for the average person on a dinner? What happens if he never spends that money (and the other money he must have given the amount he can afford to spend on dinner)?

Of course any discussion from here leads back to a deep disagreement on fundamental economics, which I think we’ve covered ad-nausium. So I’m good to let it be, though you are welcome to respond if you please.


#7

If you really think about it, In the, aggregate, the town was without debt before the rich tourist arrived. I mean, if they had simply agreed to barter their services, they would have been without debt, right? All that was missing was the “unit of account” to cancel the debt.


#8

…and yet you DO “speak for the left” if you buy into the stupidity that the left embraces. All money does NOT belong to the government. It belongs to those who’ve EARNED it. The government cannot and does not produce anything of value and it can’t spend a dime without first taking that dime away from someone who’s actually earned it. As I’ve posted before, the legal definition of theft in almost all States…if not countries…is the taking by force or threat of force the property of another and converting it to one’s own use, or to the use of another–not the owner. How else would one describe the income tax…not to mention the Kelo “decision”?


#9

how did someone come to have so much money that they can afford to pay 1 months salary
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When I was starting out I learned a couple of valuable things. 1. This one is simple. If money is involved, it’s business. In business I take emotion off of the table. That means that I NEVER make emotional purchases. For instance I want a $1,000 metal detector right now. I could afford (by charging it) 20 of them today. Why don’t I at least buy one of them…Because I really don’t “need” one nor can I justify it’s purchase. (my $400 one that I have has earned me a cool -almost- $2.00). Buying a more expensive one would be an emotional purchase & I don’t do those. 2. Being smart with the money you have (no matter how much it is). My ex kept us broke the whole time we were married. Understand, we never had that much but what we had went on clothes or do-dads she wanted. I learned from those years & vowed that I would never live payday to payday again. As part of that I vowed to invest when I could which was within a year of our divorce. I started with $50 per month & adjusted my lifestyle downward to come up with that $50. As I got extra money, that $50 went up. I did that for over 25 years. During that time I also paid off 2 houses by paying extra on the principle on both loans. I never made a payment without pay “something” extra on the principle even if it was only a couple of bucks. I didn’t have cable until after I retired. I only replaced my car when it cost me more per year than I would have paid in payments. I still don’t have a cell phone & really I could go on & on but here’s what the bottom line is. I gave myself the opportunity to do well (money wise) in life. Because of that I’ve done pretty well. If I can live another 10 years (or so) the odds are that I will have a net worth of over a million dollars. I’ve done that through saving, smart investing & smart purchases (my house is worth about 2.5 times what I paid for it).
.
So now we get to Trump. He started out with a couple of million. Had I started out with that money I would be right up there with him (I would hope). Instead I started out being eligible for welfare for the first 12 years of my career (& was doing ok without plus being married to a spender). Money gives you opportunities & instead of blaming those that have money, we should all strive to be like them. Instead we make ourselves wage slaves by doing dumb things with what we have. Most Americans these days live in the future as in their paychecks are already spent. Even if something came up & you could make some money by investing in something, you can’t because you don’t have any money to invest. Trump did, does, has, & it’s paid off (just like I have except on a bigger scale). He has also taken a lot bigger risks than I would be comfortable with & with great risks comes great rewards.
.
At one time I used to give advise to younger troops & finance was part of it. Out of about 100 of them only 2 said that they could afford to invest money for their future. (the number 1 answer for not investing was that they would die before they needed it). Yet oddly 100% of them said that they could come up with $50 per month if a family member needed the money for medication that they needed to live. I (of course) asked that question first. As for my answer to them dying & not needing to save it was this: But what if your unlucky & live a long time? Sadly people today don’t look at it that they too might be unlucky & live long enough to run out of money. That’s odd because now days most people only have to live a couple of days or a week tops before they run out of money.


#10

We’ve been through this already. Tell you what. You explain to me how someone can pay taxes before the government spends the dollars it accepts as tax payment and I’ll consider your argument. Otherwise, your argument makes no sense at all. Spending comes before tax collection, therefore taxes cannot pay for spending.


#11

You explain to me how someone can pay taxes before the government spends the dollars it accepts as tax payment
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I’ve always wondered how they take taxes & social security out before I’ve actually received the money that I earned. It’s like give me the money & then a tax bill for me to pay because I received X amount. But taking the money “BEFORE” I get it just seems wrong.


#12

This really doesn’t refut the point I was making, unless you don’t understand the point I was making…

And just to set the record straight…

People who are self employed earn their money and pay it quarterly for their taxes. If you work for a private company they take the taxes out for you, but you make the money first, then they take it out, then they give you your salary.


#13

Sorry csbrown28 I didn’t mean my post as a response to yours (or a comment about the discussion that you were having). I really meant that it bugs the heck out of me that they tax me on money that I haven’t received. I think that it hit me that they were doing that when I was about 15 years old & I’ve never forgotten it.


#14

What you described was a situation where the debts all around cancelled each other out. They could have done it as easily with IOUs or handshakes or pass-ons of obligations.

It was their pigheadedness to insist on the holding, for a moment, of a bank-bill that none of them could keep for any period of time.

And no, no one was the richer for that banknote. They were all the poorer to not find some other way of settling accounts, if they really did not have any currency to do it with.

This proves nothing - least of which would be the “effectiveness” of these “Stimulus” pork-barrel schemes.


#15

[quote=“csbrown28, post:7, topic:49058”]
If you really think about it, In the, aggregate, the town was without debt before the rich tourist arrived. I mean, if they had simply agreed to barter their services, they would have been without debt, right? All that was missing was the “unit of account” to cancel the debt.
[/quote]Correct. If two people owed each other $100, they could quickly see they don’t really owe each other. Add a few more, and it’s an information problem, but situation is the same. Everyone exchanged value for value using debt. They just didn’t realize they had paid for it. Amusing scenario (sort of like when CenturyLink expected me to send them a check for $35 when they owed me $14, and it would send me a check for $14 after I sent the $35 check – and as an aside, then it later figured out that it owed me $36 and I owed it nothing), but so what in a greater context?

This probably doesn’t prove what you think it proves :wink:


#16

No, I get it, and your right. For the record, I wasn’t trying to “prove” anything by posting this here. I did it because, even if I often disagree the folks here provide me with opinions I wouldn’t otherwise get. I think I’ve managed a comfortable truce with most of the people here and everyone treats me with enough respect to have conversation. I cannot say that about other Conservitive forums I frequent/ed.

Thanks for the input.


#17

I create value, then I pay a portion of that value in taxes; none of the value that I create is dependent upon government and government originates nothing as a springboard to the value that I create.

It makes absolutely no difference whether there is a recognized national currency or not, taxes have been paid on the increase in value for as long as governments have existed; whether the tax is calculated by a portion of the crop, a portion of the herd, a portion of the labor or a portion of the recognized currency is irrelevant.

Value is what is taxed regardless of how it is measured.

And the original story failed to account for the increase that each person put on the goods and services that they provided, in the real world the final 100 dollars that the Hotel owed would have began it’s creative journey at about 10 dollars; each step in the production process would have “added value” and that increase would be charged to the next recipient of the value.

Your story describes a Communist ideal where everyone charges exactly what it cost them and gives their “increase” to the community as a whole by not adding anything; which is why that town was broke to begin with.


#18

It is possible that these exchanges all had equal values (in this case, say $99 to the seller and $100 to the buyer, who paid the $100 for each particular thing), and it can be accepted as given in this story. Real life isn’t so neat. We realistically could see two people “owing” each other the same amount, but obviously that would end quickly. This story really doesn’t make much difference in terms of an argument except to perhaps demonstrate velocity – could be done without stealing the visitor’s cash too, with the visitor paying the hotel, working the cash around and the hotel owner paying the visitor for something the next day as he checks out.

So in this story, if I counted right there’s $495 (seller’s value) and $500 (buyer’s value) in production ($600 if the tourist is a willing part of the transaction). The transactions are made using $100 in cash.


#19

I only wish!

While you can say its trickle down its not really. Trickle down is NOT the paying of debts. Its only trickle down when there is profits being made. The problem here it only appears they are out of debt, they still need to invest profits back into their business. I own a manufacturing company and we are debt free, but that is because we are profitable so we can continue to invest into making products and pay our bills and have money left over. When I spend the money left over, my net profit over an above my reinvestment then we have TRICKLE DOWN.


#20

Last point first, just for the record, the story was nothing more than a conversation starter, not meant to endorse a particular point of view, thanks for joining in. I think calling it communist is a bit of a stretch, but hey, whatever.

I agree completely that the creation and dissemination of a government currency is not a necessary condition for the creation of value, it is however a sufficient condition.

Historically, taxes were paid so the ruling authority could provision itself (or obtain wealth). One of those provisions was military protection. People created value and the rulers took a portion of it. Ideally some of that money was spent back locally in order to provide goods and services. In those days and indeed up though the 20th Century, in order to create money, the value had to come first

Today, with a fiat currency, taxes serve an entirely different purpose, but we’ll get back to that in a sec. The government with it’s relationship with the Federal Reserve can create money. The Congress decides the things it needs to provision itself and creates a budget and the Treasury works with the Fed to deposit the money into the accounts of the private sector companies that will provide services to the government.

Does this create demand, yes. Does this create things of value, of course. Is the government limited in it’s ability to create money by the taxes it collects? No.

I’ll ask you the same question, I asked PapaD, a question I’ve asked before. If taxes are paid only in dollars and you believe that dollars are required for government to provision itself, then where do the dollars come from in the beginning before the government spends money into the economy?

Yes, people can borrow money from banks. Banks create their money exactly the same way the government does. They create it from thin air holding existing money as a reserve against the money they create.

The truth is that when a dollar is created the creation of that dollar is accounted for as a liability. The government spends that dollar into the private sector and private sector gains $1 and the Federal Government goes -$1 (whether it’s though the Treasury, Congress or the Fed).

Taxes (fiscal policy) and Savings create FISCAL SPACE for government to spend without driving up prices (inflation). A government treasury security (savings) creates fiscal space (monetary policy) by encouraging people in the private sector (or foreign sector) voluntarily purchase government assets which create fiscal space via monetary policy, rather than fiscal policy.