Good one!
Cute, but it is not how government stimulus works, and anyone who has taken accounting 101 would know that each of those individuals had $100 credit and $100 debit on their books, with a net asset of zero before the stranger came ito town. After the stranger left, everyone had zero credit and zero debit, with the same zero net asset.
bttt
Assuming all these tax payers are in the 25% tax bracket
The butchet, pig farmer, co op owner, prostitute and hotel owner each owe $25 now to the IRS
the government just made $125 for doing nothing
Wrong. With the "government stimulus package", the $100.00 bill is taken from the taxpayer and laid on the hotel desk. And the taxpayer never sees it again.
The only problem is that all of those transactions, with the possible exception of the prostitute, would have been taxed by local, state and federal governments reducing the $100 each time the bill changed hands.
The government would then borrow $17 trillion more dollars and everyone is still in debt!
Well, that’s just great...
except -
The hotel owner is now $100 poorer because he suddenly has neither the cash, nor the outstanding receivable.
Great one. I got to remember that.
Another problem: if anyone in town owes $100 to China, that $100 bill is GONE.
Emailed it on. Thanx!!
Really no different than Bob owing Bill $100, and Bill owing Bob $100. They swap notes and presto, no debt. The $100 in this scenario serves the same function, but so too would a reversal of order in services provided.
The analogy I always use is a swimming pool. The stimulus is like pumping water out of the deep end into the shallow end, and expecting to fill the pool. Of course, along the way, water spills and evaporates—that would be the petty bureaucrats pocketing their share along the way.
Since originally posting this analogy on FR several years ago, I have heard Rush use it. Great minds think alike!