Stimulus Explained

Posted: November 11, 2010 in Uncategorized

Another gem from my uncle.. This really is a great description of the problem we currently have..

How the Stimulus Works:
It is a slow day in the small Saskatchewan town of Pumphandle and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.
A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.
As soon as he walks upstairs, the motel 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 to his supplier, the Co-op.
The guy at the 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.
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.
At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.
No one produced anything. No one earned anything… However, the whole town is now out of debt and now looks to the future with a lot more optimism.
And that, ladies and gentlemen, is how a “stimulus package” works.

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Comments
  1. mdebusk says:

    Well… that is the way it’s been working. It isn’t the way it was intended to work. Stimulus spending has worked in the past. What went wrong with the most recent one is that it came way too late. People had started paying down their debt instead of spending the stimulus funds.

    That caused lots of money to disappear from the economy due to the unintended consequences of Fractional Reserve Banking.

    Unless you’re talking about the recent bailouts that were called “stimulus packages.”

  2. gypsy says:

    Michael…. more then just the bail outs, but basically the concept of “stimulus” the problem what is happening is that we have money taken from us, handed back and told we are being given money.

    The other problem is the “solutions” to “stimulate” the economy are weak.. road work does not benefit the economy.. it gathers some temporary jobs, basically busy work. The best solution would be less government involvement.. the more the gov’t is involved, the more it costs the people…

    This is also one of the many issues with the welfare system… it was a temporary “fix” but they forgot the expiration date. Instead of ending or reducing it, it just expanded. The result people who rely on it, raise their children on how to milk it.. and those who are paying for it are working, while those abusing it come up with new ways to suck more out of it.

    Welfare is a perfect example of gov’t control.. it keeps people under control, as long as they are taking the gov’t is controlling them, and the welfare cases think it is the gov’t taking care of them.. when it is the taxpayers who are doing that.

    The reality.. the more gov’t control, the more welfare cases.. the less taxpayers paying for the welfare cases.. and the cycle gets bigger & bigger.

    Stimulus will not fix a system that benefits those who do nothing, the idea of things being even for all is unrealisitic. It is not sustainable.

    The gov’t needs to shrink, welfare needs to be eliminated, and the power of the people needs to be returned.. this was a great country.. now look what it has become.

    (oops sorry for the rant)

  3. mdebusk says:

    Agreement on all counts.

    Stimulus payments are an interesting idea. When we went off the gold standard, money stopped being a thing and started being an idea. (There’s a technical term for such things, but I usually call them “useful fictions.”) So money is just information now, and information is worthless unless it’s moving.

    It’s also a given that when you give a poor person money, they’ll blow it.

    So if you want to get money flowing, just give a bunch of it to a bunch of low-income people.

    The Obama stimulus didn’t work. Neither did the last one Bush gave out. (The one before that — I don’t recall who set it up — worked well.) The last two failed because it became “cool” to pay off debt rather than buy stuff. Paying off debt takes money out of the economy rather than moving it around.

    Stimulus payments don’t work anymore. That won’t stop governments from bribing people with them anyway.

  4. gypsy says:

    Love that explaination.. money being information.. and unless info is moving it is worthless. That is excellent.

    The current stimulus is additionally a mess because of how it is being used.. it is said to be “creating jobs” .. but it is not, it is making some temp busy work, that does not keep things going, just patch work. More is being taken from businesses, and so businesses give back less, hire less, spend less on their businesses, and when all that has become stagnant so does the economy..

    The concept of stimulus is to stimulate the economy, not throw money around blindly like he was the piped piper.. joy-joy happy, completely carefree. Our country is not a game show.. the money is the taxpayers, and he should not be ignoring what the people want.. and we want him to stop! he needs to hide in a closet, till his term is up, and then exit (sooner would be great, but I will accept no later then the original check out date).

  5. mdebusk says:

    Yes. The function of government is not to “save or create jobs”.

  6. gypsy says:

    exactly.. Mike.. they are throwing a two-fer in there too.. as they are spending our money (not) creating jobs, they are destroying the work they SHOULD be doing..
    this is the bus boy trying to do the work of the chef.. they should just stick to busing tables.

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