Financial bailouts explained!

A remarkably simple explanation, courtesy of a Greek Hotel, about financial bailouts!

Last week-end I was indebted to Neil Kelly for supplying a more humorous look at life for Learning from Dogs.  This week-end I turn to friend, Bob D., a corporate airliner Captain out in the Middle East.  Here is Bob’s contribution for today. (Editor’s note: at the time of posting this, 1 euro = 1.3405 US dollars, ergo €100 = $134 – read on, this will make sense.)

No connection with the hotel in the story!

For those interested in world events….

How the Greek bailout package works.

It is a slow day in a damp little Greek town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.

On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.

The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.

The hotel proprietor then places the €100 note back on the counter so the rich traveler will not suspect anything. At that moment the traveler comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

And that, Ladies and Gentlemen, is how the bailout package works.

21 thoughts on “Financial bailouts explained!

  1. Very clever, I’m sure. However, I think even Jeremy Clarkson’s decision to make fun of the circumstances that prompt people to commit suicide by jumping in front of trains is in better taste. Even if, by some miracle Greece does not default on its debt, and stays in the Euro, it will still owe more than 100% of its GDP in 10 years time. However, it is far more likely that the opposite will happen; and the Euro will break down.

    It was a crazy idea to think that radically different economies could ever operate with a single currency. However, the solution proposed now is madness too. Sarkozy and Merckel claim they do not want a European superstate (and with good reason – their respective citizens do not want one either), but what is fiscal unity if it is not a complete abrogation of national sovereignty?

    Meanwhile, the UK sits on the sidelines with Conservatives (quite rightly in my opinion) seeing an opportunity to take back powers already conceded to Brussels (although it is a bit like demanding money from a widow at her husband’s funeral). All in all, it is a lose-lose situation for the entire global financial system. I cannot see how even China will come out of it well. Do you still feel like laughing?

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    1. Martin, My first reaction when reading your comment was that any comparison with Clarkson was somewhat tenuous. My second was that you had temporarily suffered from a sense-of-humour failure. But if it offended you then my apologies. Frequently, the most powerful messages come through laughter.

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      1. No problem. Apologies if I came over as a wee bit too emotional. I am just very worried about where this is all going to end. I was therefore not offended and, although I did suffer a slight sense of humour failure, this is not common for me. With regard to Clarkson, I certainly did not do so; and those that did not see the funny side of his remarks (about strikers at least) are just ridiculous (in my humble opinion).

        I agree laughter therapy is good – so keep up the good (weekend) work.

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      2. The joke is indeed very clever and visualising the situation it describes is indeed funny. However, it bears little resemblance to what the EU has tried and failed to do to help Greece; the reality of which is about as funny as a smack in the face with a brick. 🙂

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    2. I am not sure your assertion that the European political elite does not want a superstate is correct. EVERY ACTION in the last 40 years seems to refute this. In the treaties is written of the need for “ever-closer union”. It is true that the peoples of France and Germany do not want this, but they will not be asked:

      “Nov 2011 – MR. SCHÄUBLE said the German government would propose treaty changes at the summit of European leaders in Brussels on Dec. 9 that would move Europe closer to the centralized fiscal government that the currency zone has lacked.

      The ultimate goal, Mr. Schäuble says, is a political union with a European president directly elected by the people.“What we’re now doing with the fiscal union, what I’m describing here, is a short-term step for the currency,” Mr. Schäuble said. “In a larger context, naturally we need a political union.”

      He sees the turmoil as not an obstacle but a necessity. “We can only achieve a political union if we have a crisis,” Mr. Schäuble said.

      Just read what these people say: https://eurevealed.wordpress.com/what-they-said-2/

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      1. Although I can’t recall the exact context, it is as if time has stood still for three-and-a-half years. I also really don’t understand why I appeared so unamused by this post. However, I stand by my view that a single superstate is a foolish endeavour. It is often said that the EU/EC/EEC has ensured peace in Europe since 1945. However, if so, how come there was peace in Europe for 99 years after the Battle of Waterloo?

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      2. To be honest, my reference to Waterloo is probably a logical fallacy… and peace in Europe since WW2 is probably due, in large part, to the Treaty of Rome that created the EEC. However, it is not the only reason; others would include the dominance of the US and USSR during the Cold War era…

        I found myself writing quite a lot here but have decided to turn my remarks into a post on my own blog. I will, of course, link back to this.

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  2. Many have rage. So they want to kick something. Will the honorable Martin above explain his foaming Europhobia? And how does he explain 2 million Brits in the streets? From Cameron’s accute Europhilia? And Martin should explain to the French how forking over dozens of billions from French taxpayers to Greece is a smack in the face with a brick…

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      1. Paul: Good call, as Obama would say! To see Europhobia rising in a situation which has nothing to do with it, riles me up a bit, as a matter of principle. I notice Chris (Snuggs) has become more careful and better targeted on the whole thing, very very recently… OK, let see those bricks flying. If throwing 400 billion dollars at Greece is bricks flying, could I please get some thrown my way?

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    1. Patrice,

      In as much as I would not vote for the UK to leave the EU, I am not Europhobic. Jacques Delors has recently gone on record as having said that the collapse of the Euro is (or will be) due to poor implementation (i.e. they set fiscal rules and then did not stick to them). However, for me it is more fundamental than that.

      It was crazy to think the economies so widely divergent as those in the Eurozone 12 years ago could ever operate with a single currency – even less so under a single fiscal policy (as now proposed). This is not ideologially-driven opposition to a European Superstate – this is an acknowledgment of reality.

      It is, in my opinion, analogous to refusing to bow to political pressure to treat men and women the same. They may be equal under Law (or at least they should be), but men and women are not the same: Equality does not necessitate (nor should it demand) uniformity. NATO/OTAN has given us 50 years of peace in Europe. Therefore, we don’t need a European Superstate to guarantee the peaceful future we all want to see…

      For the record, what I meant was that the potential collapse of the Euro Zone is about as funny as a slap in the face with a brick.

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