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US government's business policy!

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$tyli$h Executive:
A few days ago I received this email from an unknown source, I thought I might share it with you guys. In a way I think this email tries to explain the multiplier effect‘ where money is created by temporarily depositing a certain amount of money with party X, and then party X deposit that amount with party Y and so on. Thus that amount of money is multiplied to an infinite number unless restricted by central banks by implementing a required reserve.

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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 his 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, takes his 100 Euro note, 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…

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

Deadly_king:
Oooh.......that's very aweful.

How do they plan to develop if they perform like this?

elemis:
The US government simply borrows money from different countries and institutions around the world, but one might ask how CAN they borrow such large amounts with little or no collateral ?

So what the government does is issue TREASURY BONDS to their creditors. Now you might think, so what ? They still owe the money once the bonds mature.

Here's the clever part. Each of those bonds is valued in DOLLARS. So when it comes time to pay all the US has to do is print more money to pay off the debt.

However, the printing of money simply devalues the currency so that all the creditors receive is worthless paper.

A true story.

Alpha:
That's not a bad strategy. It's just the flow of money, that has to go on.

Thank you for sharing Bill. :)

Arthur Bon Zavi:

--- Quote from: Kirin on December 03, 2010, 06:01:18 am ---The US government simply borrows money from different countries and institutions around the world, but one might ask how CAN they borrow such large amounts with little or no collateral ?

So what the government does is issue TREASURY BONDS to their creditors. Now you might think, so what ? They still owe the money once the bonds mature.

Here's the clever part. Each of those bonds is valued in DOLLARS. So when it comes time to pay all the US has to do is print more money to pay off the debt.

However, the printing of money simply devalues the currency so that all the creditors receive is worthless paper.

A true story.

--- End quote ---

What an exact point. 8)

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