Economics 101 .... the rest of the story ....

Crazy Horse

Well-known Member
Man, lots of good replies and interesting comments on the story about the movement of the $100 and what actually did happen as it moved full circle. And someone was correct in saying it was an accounting puzzle, not an economic one. I believe those that said the whole thing ended up being a wash were correct. First, the traveler really wasn't really included in the town's money movement, he just showed up with the money and left with the same amount. Meanwhile, every town dweller in the story started out owing $100 to someone else but at the same time was owed $100 by some other person. The same thing resulted at the end of the story. So a net wealth of zero dollars really for each person to start, and this was the case at the very end. I think I got that correct.

But from the original story, I omitted the last sentence on purpose so as to focus on what happened with the townspeople. Here is what I left out, and some replies did actually touch on this one way or the other. Here ya go .... I suspect it opens the door for some replies.

"AND THAT, MY FRIENDS, IS HOW A GOVERNMENT STIMULUS PACKAGE WORKS!"
 
I still stand by my answer.
The government got that $100.

Every time that money changed hands it became a income for that person.
Move it across enough hands and little by little the government gets it threw income tax.

Same thing happens with a government stimulus package.
The government interjects money into the economy.
The money changes hands all the while calming the community.
The community becomes richer and in a higher tax bracket giving even more of the money back to the government in taxes.
 
(quoted from post at 08:43:37 10/09/19) I still stand by my answer.
The government got that $100.

Every time that money changed hands it became a income for that person.
Move it across enough hands and little by little the government gets it threw income tax.

Really what % of $100 bills do you think really gets reported on Federal income tax returns??? I'll bet less than 1%!!!
 
John ..... well really, the whole thing was a hypothetical situation. You can throw in all kinds of things, some of the replies did that. You mentioned tax, others mentioned other things that were involved in reality. But in terms of the original story, to explain itself it had to stay at a basic and simple level to make the story. Like I said, it was hypothetical and necessarily so.
 
The way things are working now the Federal Reserve makes up a bunch of 'money' out of thin air,they lend it to banks and the banks or their cozy customers buy up gov't Debt Bonds.
Gov't then flushes the made up money out into the economy by way of Welfare,subsidies,make work projects,endless list.It makes everyone richer except those holding cash, the value and buying power of their cash is reduced.Buying on credit is encouraged because the next wave of made up money will make paying the debt off easier.All works great until economic reality sets in.
 
A stimulus package can work.

If all the towns people in your story felt better, and had a new start at zero instead of in the hole, and they could now work to get above.

It can help.

The trouble is if it doesn?t work, then it?s done, another round, or another 20 rounds, of stimulus won?t help any.

If your tractor battery is drained, using a jump starter to get it going is a good stimulus, and things will be fine after.

If your tractor battery is frozen, the jump starter might get it started, but the battery is still dead, it doesn?t really help in the long term.

Similar, a stimulus can be positive, but it also can be throwing tax dollars after bad.

Someone intelligent would need to look at the situation, unfortunately in politics it?s all about vote chasing, not really helping anyone.

Paul
 
You are absolutely correct, people holding money are the big looser. I believe that this is the reason real estate, and good farm land in particular, are attractive places for folks that have a few bucks to invest park their cash. Interest doesn?t keep up with inflation, and stocks are always a gamble. Because if a crash does in fact come, stocks become worthless paper, but land is still there, and will have some value. Tenants of farm land are far less trouble than residential tenants, and have fewer right.
 
First, the Government has no money if it's own....at least not real money. The real money belongs to the people. As someone else mentioned, since going off the gold standard, the Gov makes its money out of thin air.

That is done because there aren't enough real people making real money, to support not only a bloated Gov filled with overpaid Reps, their pet pork projects, and entitlements.

Our whole system is a house of cards that can, and has, come crashing down around us at any moment, simply because the Feds do something stupid, and some Wall Street trader, etc, gets 'scared'.

That said, I've got an article from 1955 discussing all this. The root of the article was that if you work, and pay taxes, to avail yourself of every Gov program you could. Why? Because the Gov has YOUR money. If you don't use Gov programs it's given to someone else.

Then, even for the programs you may use, they take a dollar from you, give you back 70 cents, and brag about what they did for you....even though it was your 30 cents they kept as a fee for giving you back the rest.....

It's as, if not more, true now than it was when the article was written 64 years ago.
 
The guy that owed the hooker money should of not paid her and kept the 100 bucks. Whats she going to do tell the cops? (maybe tell his wife if he did not pay)
 
And look at the debt hole Uncle Sam has been digging since 1955!Where is the fiscal responsibility?Uncle Sam has made promises it can't keep.And how many Americans are all to willing to accept government handouts at someone else's(productive people's) expense.What we have is American style socialism.You can only squeeze productive people so long...sooner or later something's gotta give.Are we nearing that point?
Paul
 
Same as what you are saying, I remember when every beer joint and lounge south of Alexandria had poker tables and the ''house'' provided the drinks and dealer and ''cut'' the pot each hand, you could not make some people understand that it would not take long and the house would have all of the money.
 
Short answer, yes.

The problem is the workers making the real money have become a minority, while the entitled masses have become the majority, so there's not enough real money to go around.

The more folks on the Gov dole, the more the Gov is 'needed' to make money out of thin air, therefore the greater the power the Gov has over The People who need that made up money to survive, without being productive......

Beyond that, I'll let you draw your own conclusions as to where I'm headed, because things would be getting too political otherwise...
 
(quoted from post at 06:08:26 10/09/19) A stimulus package can work.

If all the towns people in your story felt better, and had a new start at zero instead of in the hole, and they could now work to get above.

It can help.

The trouble is if it doesn?t work, then it?s done, another round, or another 20 rounds, of stimulus won?t help any.

If your tractor battery is drained, using a jump starter to get it going is a good stimulus, and things will be fine after.

If your tractor battery is frozen, the jump starter might get it started, but the battery is still dead, it doesn?t really help in the long term.

Similar, a stimulus can be positive, but it also can be throwing tax dollars after bad.

Someone intelligent would need to look at the situation, unfortunately in politics it?s all about vote chasing, not really helping anyone.

Paul

Paul, please show me a stimulus package that has worked.

Roosevelt's failed. His stimulus packages started shortly after he took office in 1933. The US did not pull out of the Great Depression until 1942, after massive factory orders for war material got the civilian factories to call back/hire workers. 9 years! No stimulus packages` have ever worked as in the government creating enough jobs to matter. Boils down to what stimulates the economy? That's easy. Spending money. People spend money, increasing factory orders and that in turns puts people to work. Great Depression was a world wide event. Of the "developed" nations the hardest hit was Germany because of the punitive nature of the Treaty of Versaille. In 3 short years Germany went from massive unemployment to a robust economy. When they went to rearm massive factory orders were placed for weapons, clothing and everything else a modern (at the time) military needed. People were able to get jobs. Then they were able to start buying things for themselves. That in turn created more demand and more jobs.

Rick
 
More to it. The pre-nazi leaders pushed Germany into an artificially worse depression as part of a game/ balancing act to get out of paying the allies. They purposely made decisions to make things worse to support their
case that they couldn't pay but in the middle of that play, lost control of the Government to the Nazi's. With the removal of these artificial hobbles on the economy combined with seizing the private wealth of a huge
portion of their population leading into a managed war time economy yes it turned around. It's a pretty non-relevant example.
 
(quoted from post at 07:20:16 10/09/19)
But from the original story, I omitted the last sentence on purpose so as to focus on what happened with the townspeople. Here is what I left out, and some replies did actually touch on this one way or the other. Here ya go .... I suspect it opens the door for some replies.

"AND THAT, MY FRIENDS, IS HOW A GOVERNMENT STIMULUS PACKAGE WORKS!"

That's not at all how a government stimulus package works.

A stimulus package is a combination of economics AND psychology. Whether a stimulus package works or doesn't work cannot be answered with a yes or no, it depends on how you measure how the psychological impact changed the economic trend. If such a thing can even be measuared, which has been debated for about 2 centuries now.

The only way to truely be able to know if a stimulus package "worked" or "didn't work" would be to be able to time travel such that a given recession/depression could be treated 2 different ways (with and without stimilus) and then it could be known which worked out better.

Complicated questions have complicated answers, not everying can be boiled down to simple yes or no answers.

Grouse
 
You get it! Old Tanker neglected to say just where the money came from to re-arm and pay those workers. An entire group of people were made the 'fall guys' and their wealth taken to fund the war machine.
 
A stimulus package of sorts occurred this summer in the ag sector, in the form of payment for a common commodity crop,the soybean. At the same time that payment went out Deer announced 160 employees would be laid off out of there combine factory. They want to reduce production by 20 % , their sales are down because grain prices are down and farmers are not buying new harvesters.So maybe the stimulus did not work for the farm equipment workers in this example of the ag economy.The farmers stimulus money must have been spent on some other pressing farm expenses instead. There may not be a simple answer for whether a stimulus package works in a large complex economy that might be booming, declining, or flat. A country's economics or stimulus packages would not be explained in a hypothetical accounting puzzle.
 
China is buying Gold at an accelerated pace and buying up farm land and other real property all over the World.All hard assets, they know the value of play money.(LOL)
 
I have heard that the CCC camps taught millions of folks how to get out of bed on time, follow orders, pay attention, learn a skill, and act like responsible citizens. Maybe that would be one of the "unmeasurable" benefits. Like the discipline learned in boot camp. Find that measurement on a financial spreadsheet.
 
(quoted from post at 10:11:39 10/09/19) You get it! Old Tanker neglected to say just where the money came from to re-arm and pay those workers. An entire group of people were made the 'fall guys' and their wealth taken to fund the war machine.

I figured that everyone was smart enough to understand where that money came from. And Hitler and his cronies didn't pay for all of that with Jewish money between 1933 and 1936. They didn't start to seize Jewish property until 1938. So the funding of the German war machine as you put it, with assets stolen from the Jewish population, didn't start until 1938. And yes, timeline is important here.

Now much did Roosevelt spend on his stimulus packages, the construction projects, CC and such that failed? The "New Deal" alone was 500 million dollars between 1933 and 1936. That's about 9.6 BILLION in today's money. And it was an utter failure. When millions were out of work thousands were employed. I know. We were all taught that Roosevelt was a saint. But actually look at the historical records and what we were taught in school and fact are 2 different things. One thing that Roosevelt did do which was very important was he gave the people both hope and confidence that they would survive and that things would get better. His now famous "fire side chats" worked wonders! Now the failures of his programs? He wasn't alone. England embraced much the same response to the depression and they too failed. They became involved in WWII in 1939 so they did recover much quicker. Now here is the kicker. Roosevelt's failure to get us out of the depression WAS NOT ENTIRELY HIS FAULT! Congress was actually much to blame. The Isolationist party was alive and well. And they had enough votes that they would have blocked any move to rearm the US. I firmly believe that had he be allowed to that Roosevelt would have gladly used military procurement as a means of stimulating the economy. Congress didn't want to waste the money on military procurement or making the military larger.

Kinda follows. What did the stimulus packages passed and spent by both the "shrub" and "O" do other than bail out a few companies? Those "shovel ready" jobs never materialized. Billions and billions spent to what end?

Rick
Governments in general are terrible at creating jobs.
 
(quoted from post at 08:50:17 10/09/19) More to it. The pre-nazi leaders pushed Germany into an artificially worse depression as part of a game/ balancing act to get out of paying the allies. They purposely made decisions to make things worse to support their
case that they couldn't pay but in the middle of that play, lost control of the Government to the Nazi's. With the removal of these artificial hobbles on the economy combined with seizing the private wealth of a huge
portion of their population leading into a managed war time economy yes it turned around. It's a pretty non-relevant example.

Again. They didn't start seizing assets 1938. 2 years after the German economy was actually booming. So how is that non-relevant? What's non-relevant in this conversation is the seizure of assets in getting Germany out of the throws of the depression. Now you want to move into what Hitler and Germany did from 1938 it becomes very relevant. I'm not praising Hitler here. IMO he was as despicable evil monster. About the only good thing I can think to say about him is he killed Hitler! All of his moves that restored Germany's economy were aimed at eventual world conquest and domination.

Rick
 
oldtanker, um yeah, about those shovel ready jobs...can't speak for the rest of the country but around here it helped the small independently own phone company expand into telecommunications. They wanted to run fiber optic cable every where, but couldn't get banks on board with financing. The stimulus package capitalized that project. The best part is that they ran a fiber optic cable right to my front door -yay, no more dial up! That little company expanded quite a bit after that, opened new offices and hired more employees, etc. I'm not trying to be argumentative but that stimulus package made a significant improvement to this community. Just saying.

JD
 
Maybe to real project was not the "bridge" or "ditch", the real work was building a trained and disciplined workforce that could be productive for the next 50 years.
PS: is Boulder Dam still making power 80 years later?
 
(quoted from post at 09:00:28 10/10/19) oldtanker, um yeah, about those shovel ready jobs...can't speak for the rest of the country but around here it helped the small independently own phone company expand into telecommunications. They wanted to run fiber optic cable every where, but couldn't get banks on board with financing. The stimulus package capitalized that project. The best part is that they ran a fiber optic cable right to my front door -yay, no more dial up! That little company expanded quite a bit after that, opened new offices and hired more employees, etc. I'm not trying to be argumentative but that stimulus package made a significant improvement to this community. Just saying.

JD


OK how many jobs nation wide were created with those shovel ready jobs? In was in the thousands. But not in the 100's of thousands or millions that were needed. In fact the reports I read claimed less than 10,000 jobs total were created. That same report acknowledged that 10 or thousands of jobs were saved but few actual new jobs were created. It was dismal at best. You can look it up!

One small company benefited? Our, or at least my tax dollar was supposed to be creating hundreds of thousands of new jobs that benefited the ENTIRE NATION. So the stimulus benefited your small community. There was no benefit from it here. But facts neither care about me or you. And the folks who study these things ranks the stimulus packages as a tremendous waste of money and a failure. In fact if you bother to read the economic news they frequently write stories and use "The Great Recession" stimulus efforts as examples of how not to stimulate the economy right now today. The leading experts point out time and time again the failures. From the construction ready jobs to tech company things to green energy.

Think about it. There are economic indicators that they use to rank the economy. Certain criteria has to be met for an economic trend to be ranked a recession or a depression. The Great Depression could have improved to the recession status. But it stayed in depression status until massive orders for military goods cause the companies to call back workers and to hire and train new workers.

And now I'm reading here about a trained workforce coming out of the depression? Who made up that fairy tail? Had the jobs programs put a significant number of people to work I could believe it. They hired thousands, not millions of people and millions were out of work. According to the US government of the 30's unemployment ran about 31%. According to historians who are studying the 30's it peaked close to 80%. The disparity in numbers comes from the same things we see today. The government under counting. The historians are looking at # of jobs during the depression versus the number of workers employed right before the depression.

Rick
 

We sell tractor parts! We have the parts you need to repair your tractor - the right parts. Our low prices and years of research make us your best choice when you need parts. Shop Online Today.

Back
Top