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This is a funny joke that has been circling the internet:
It's a slow day in some little town........
The sun is hot....the streets are deserted.
Times are tough, everybody is in debt, and everybody lives on credit.
On this particular day a rich tourist from back west is driving thru town.
He stops at the motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night.
As soon as the man walks upstairs, the owner grabs the bill and runs next door to pay his debt to the butcher.
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill at the feed store.
The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her services on credit.
She, in a flash rushes to the motel and pays off her room bill with the motel owner.
The motel proprietor now places the $100 back on the counter so the rich traveler will not suspect anything.
At that moment the the traveler comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money & leaves.
NOW,... no one produced anything...and no one earned anything...however the whole town is out of debt and is looking to the future with much optimism.
And that, ladies and gentlemen is precisely how the U.S. and Canadian Governments are conducting business today!
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This is such a true comment, but sounds more like what it used to be because banks/people/businesses aren't handing out loans near as easily as they used to. This kind of sounds similar to the idea of repos that Professor McKinney was talking about! Both are ways to shift money without really making a difference so "the books look good". In the joke everyone paid off liabilities like with repos where businesses looked like they had more cash.
ReplyDeleteKelsey bringing up repos and book cooking made me think about something. Financial statements can be so easily manipulated. The clip we watched in class illustrated this and then I was reminded of Enron. Mark to market accounting combined with a little corruption created a problem that no one saw growing because of the cooked books. I remember when I took accounting, that one has to examine all of the different types of financial statements to get a clearer picture. Each statement is like a piece of a puzzle. One alone can hide some serious problems.
ReplyDeleteThat is an important point Noah. It seems that when firms tweak their books they are merely doing so to look good. Either firms need to be more honest and show the other important information or we need to pay more attention to the other "pieces of the puzzle". As firms and consumers alike are all taking more oaths to be more responsible and have better ethics it is implying that we make smarter choices with our money and manage our assets and liabilities better as well as pay closer attention to the firms' information as we can see warning signs especially from such large corporations. If many of the fortune 500's start to show red flags then maybe we can make something of these patterns. Overall we need to be nosier.
ReplyDeleteBryan you make a very good point when saying we need to be nosier with firms. However it becomes very difficult when they're front are these false numbers and facts. It makes the consumer in a sticky situation on whether they want to follow the firm and if in fact they do, are they correct with their information.
ReplyDeleteThis joke was extremely clever and witty.
I enjoyed reading this joke and it made me think that its too bad the US can't get rid of all their debt this way. It would be nice if someone just came along and payed off their debt that in turn allowed another person to pay off their debt and so on. But there is no one that this would ever happen since the government debt is at $12.7 trillion dollars.
ReplyDeleteThe rich man knew that he would have his $100 waiting for him if he decided not to stay. He knew he'd get it back. But in trying to think of how this could work in the real world, why couldn't countries work together to mutually eliminate some of their deficits? One country could be pardoned of a certain amount of debt only if the other country was in turn pardoned, or pardoned by another country. It could be a web of mutually beneficial agreements so there wouldn't be the need for one country to come in and front the $12.7 trillion. Probably just unrealistic wishful thinking
ReplyDeleteThis joke reminds me of discussions in public finance and fiscal policy. Consumers and businesses alike have over-extended themselves regarding credit. The large availability of credit in the past has caused people to live above their means in an unrealistic fashion. Now that credit is largely unavailable we are seeing the reprecussions of this lifestlye which is in turn eroding our economy. Funny joke though...
ReplyDeleteThis is too funny. Unfortunately there is no debt equality in the international credit markets. There are debtors and creditors.
ReplyDelete