Wall Street Notes Goods Redistribution And The White House
This tale begins in the month of July, in a small town. The weather is pleasant but with averaging one visitor a month the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.
Suddenly, a rich tourist comes to town. He enters the only hotel, lays a $100 bill on the reception counter, and asks for a meal and later goes to inspect the rooms upstairs in order to pick one. The hotel proprietor takes the hundred dollar bill and runs to pay his debt to the butcher.
The produce supplier and meat packaging supply guy takes the $100 bill and runs off to pay off his debt to the rancher. The rancher runs out with the $100 bill to pay for feed costs. The feed and grain merchant runs out and pays his bill for fuel costs.
Now that the supplier of fuel has some cash, he takes the hundred dollar bill and runs to pay his debt to the town prostitute that, because of hard times, gave her service on credit. The hooker runs to the hotel, and pays off her debt with the hundred dollar bill to the hotel proprietor in order to pay for the rooms that she rented when she brought her clients there.
The hotel proprietor then lays the hundred dollar bill back on the counter so that the rich tourist will not suspect anything. After finishing a great meal and feeling refreshed he pays for the meal with pocket change and foregoes inspecting the rooms. Feeling energized and seeing the storm clouds lift, the rich tourist takes his hundred dollar bill and leaves town.
As the story unfolds, so far, no one earned anything. However, the whole town is now with less debt, and looks to the future with a little more optimism. That is similar to how the United States Government is doing business today shifting liabilities from one balance sheet to another.
Now the wealthy tourist was impressed by his meal and had nice things to say about the town and it became a news story. Soon after, 8 new tourists make their way to the town hotel. The owner overcome by the bonanza of new customers wants to raise his room charges and menu prices. The butcher, rancher and feed and fuel suppliers are in the throes of raising their prices. And the prostitute needed to raise her prices in order to cover the increased room rates.
As long as everyone is proactive paying off their debts, money circulates. Bailouts haven't done much of anything other than pay off some debts, mostly that of the big folks in a way that liabilities have been transfer from one balance sheet to another. However, when the positive news emerges and "green shoots" of optimism takes hold, gushing new purchases by the little people will surge and lift all boats ... and on off we go to the races we go. In order to remain ahead of the news, get your Wall Street Journal subscription today.
Suddenly, a rich tourist comes to town. He enters the only hotel, lays a $100 bill on the reception counter, and asks for a meal and later goes to inspect the rooms upstairs in order to pick one. The hotel proprietor takes the hundred dollar bill and runs to pay his debt to the butcher.
The produce supplier and meat packaging supply guy takes the $100 bill and runs off to pay off his debt to the rancher. The rancher runs out with the $100 bill to pay for feed costs. The feed and grain merchant runs out and pays his bill for fuel costs.
Now that the supplier of fuel has some cash, he takes the hundred dollar bill and runs to pay his debt to the town prostitute that, because of hard times, gave her service on credit. The hooker runs to the hotel, and pays off her debt with the hundred dollar bill to the hotel proprietor in order to pay for the rooms that she rented when she brought her clients there.
The hotel proprietor then lays the hundred dollar bill back on the counter so that the rich tourist will not suspect anything. After finishing a great meal and feeling refreshed he pays for the meal with pocket change and foregoes inspecting the rooms. Feeling energized and seeing the storm clouds lift, the rich tourist takes his hundred dollar bill and leaves town.
As the story unfolds, so far, no one earned anything. However, the whole town is now with less debt, and looks to the future with a little more optimism. That is similar to how the United States Government is doing business today shifting liabilities from one balance sheet to another.
Now the wealthy tourist was impressed by his meal and had nice things to say about the town and it became a news story. Soon after, 8 new tourists make their way to the town hotel. The owner overcome by the bonanza of new customers wants to raise his room charges and menu prices. The butcher, rancher and feed and fuel suppliers are in the throes of raising their prices. And the prostitute needed to raise her prices in order to cover the increased room rates.
As long as everyone is proactive paying off their debts, money circulates. Bailouts haven't done much of anything other than pay off some debts, mostly that of the big folks in a way that liabilities have been transfer from one balance sheet to another. However, when the positive news emerges and "green shoots" of optimism takes hold, gushing new purchases by the little people will surge and lift all boats ... and on off we go to the races we go. In order to remain ahead of the news, get your Wall Street Journal subscription today.
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