Family & Relationships0 min ago
THE IRISH BAIL OUT
6 Answers
It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism. And that, Ladies and Gentlemen, is how the bailout package works
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Except for a couple of minor points:
Unlike the settling of your fictional chain of debt, in reality every time the cash changes hands the government in whatever country the transaction is made will want its cut in taxation (to provide, among other things, funds for future bail-outs). This very quickly reduces the amount of cash changing hands.
Furthermore, if any of the participants in your chain happen to want a currency other that the blighted Euro, they will have to pop to the bank and change the Euros into their chosen currency and those wanting Euros further along the chain will have to do likewise, again reducing the sum passed on.
Lastly, unlike your fictional chain of debt, somewhere along the line the cash will encounter a body which is either unable or unwilling to settle its debts (unable because they may have larger debts elsewhere outside the chain which they see as more pressing, or unwilling because they have a government which, like our previous one, actively encourages the accumulation of large debt).
Other than that, it works a treat!
Unlike the settling of your fictional chain of debt, in reality every time the cash changes hands the government in whatever country the transaction is made will want its cut in taxation (to provide, among other things, funds for future bail-outs). This very quickly reduces the amount of cash changing hands.
Furthermore, if any of the participants in your chain happen to want a currency other that the blighted Euro, they will have to pop to the bank and change the Euros into their chosen currency and those wanting Euros further along the chain will have to do likewise, again reducing the sum passed on.
Lastly, unlike your fictional chain of debt, somewhere along the line the cash will encounter a body which is either unable or unwilling to settle its debts (unable because they may have larger debts elsewhere outside the chain which they see as more pressing, or unwilling because they have a government which, like our previous one, actively encourages the accumulation of large debt).
Other than that, it works a treat!
Meanwhile, in another town A has £10 spare cash and lends it to B. B lends it to C who in turn lends it to D, and so on until Y lends to Z.
So apart from A, everyone owes someone £10 and is worried about how to repay it.
Things remain that way for a while until Z decides to take his £10 from under the mattress and repay Y. Y then repays X and so on, until B repays A.
No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.
Was there ever really a debt problem?
So apart from A, everyone owes someone £10 and is worried about how to repay it.
Things remain that way for a while until Z decides to take his £10 from under the mattress and repay Y. Y then repays X and so on, until B repays A.
No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.
Was there ever really a debt problem?
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