www.iva.co.uk

An email I recieved

"It is August. In a small town on the South Coast of France, holiday season is in full swing, but it is raining so there is not too much business 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 Euro100 note on the reception counter, takes a key and goes to inspect the room located up the stairs on the third floor.

The hotel owner takes the banknote in hurry and rushes to his meat supplier to whom he owes E100.
The butcher takes the money and races to his supplier to pay his debt.
The wholesaler rushes to the farmer to pay E100 for pigs he purchased some time ago.
The farmer triumphantly gives the E100 note to a local prostitute who gave him her services on credit.
The prostitute goes quickly to the hotel, as she owed the hotel for her hourly room use to entertain clients.
At that moment, the rich Russian is coming down to reception and informs the hotel owner that the proposed room is unsatisfactory and takes his E100 back and departs.

There was no profit or income. But everyone no longer has any debt and the small town people look optimistically towards their future.

COULD THIS BE THE SOLUTION TO THE Global Financial Crisis? Or, is there a catch here?"

I beleive the difference is that the Russian paid up front for the room and did not borrow any money. For the world credit crisis to be sorted you would need somebody to come along with a heck of a lot of money in thier back pocket that they had not borrowed.

The Govenor of the Bank of England - he just prints it when he runs out!

If the governor of the bank of England printed a load of money to sort the finances out then would this not lead to more money in circulation which would then devalue everything and see a reduction in GDP.

According to Vince Cable that is exactly what he is doing!

thats worrying then because a reduction of gdp will mean we are still in recession.

Absolutely - I read in The Economist that we are heading for deflation!

My boss has told me I must sign off now - eyes. All the best Paul.

thats what will happen if they print more money

So it could work then?

No, because printing money is not the same as the Russian mans case of having the money up front. Also it is more complex because each creditor in the case above only had one debtor where has in the worls economy each country has more than 1 creditor and or debtor.

We don't actually know that the Russian had the money upfront. What we do know is that some movement was generated and people percieved they were better off then they were before where in fact nothing really happened. I am better off now than I was a year ago but my credit reports would say otherwise.

The farmer triumphantly gives the E100 note to a local prostitute who gave him her services on credit.
The prostitute goes quickly to the hotel, as she owed the hotel for her hourly room use to entertain clients.

So the hotel owner is still owed his money? That's how I read it.

Guess there is never something for nothing!

S x

Personally, I think the prostitute needs to take more care of her hotel, then maybe she would get more customers and would'nt need to be on the game

I've got that wrong, she 'owed' the hotel not
'owned' it.

Either way, never trust a Farmer.