Monday July 4th, 2011

Greece/Not A Problem

A very good friend of mine from Switzerland sent me the following story:

It is an overhung day in a small town of a concerned country. It rains and all the streets are empty. Times are not good, everybody is indebted and all people live on borrowed money.

One day, a German tourist drives through the town and stops at a small hotel. He tells the owner that he would like to take a look at the rooms and perhaps rent it for one night. The deposit he puts on the counter is a 100-Euro bill.

The owner hands him a few keys. Then they start:

  1. soon as the visitor is up the stairs, the hotel owner takes the money, races to see his neighbour the butcher and pays his debts.
  2. The butcher takes the 100 Euros, runs down the street and pays the farmer.
  3. The farmer takes the 100 Euros and pays the bill that came in from the association for using storage facilities.
  4. The gentleman in charge there takes the 100 Euro bill, hastens to the pub and pays his liquor bill.
  5. The pub owner descreetly hands the bill to a prostitute sitting at the bar. She has seen poor times and allowed the pub owner some liberties on credit.
  6. The whore runs to the hotel where she pays the hotel bill with the 100 Euros.
  7. The hotel owner puts the bill back on the counter.
  8. At the same moment, the traveller comes down the stairs, takes the bill and says that none of the rooms he saw was to his liking, Then he leaves the town.

➩ Nobody produced anything.

➩ Nobody earned anything.

➩ Everybody got rid of their debts and

➩ they all look optimistically towards their future.

So, now you all know how it is done. This is how easy the EU emergency package works.

The author is unknown to us.

(Translated by EG)

Now we know. Detlev SIX had found it out: The author is Cordt Schnibben. The story is out of Spiegel “Die bürgerliche Kernschmelze”. See the comments.

8 Kommentare zu “Greece/Not A Problem”

  1. PEP (Monday July 4th, 2011)

    Super das trifft es genau.

  2. six (Monday July 4th, 2011)

    Der Autor ist Cordt Schnibben und die Geschichte stammt aus einem Artikel des vorletzten Spiegels “Die bürgerliche Kernschmelze”. Der Artikel ist übrigens sehr empfehlenswert.

  3. Chris Wood (Monday July 4th, 2011)

    Holidaying in Greece, we were held up at the famous sinking bridge, when a van got stuck, blocking a long line of traffic. One wheel had run of the road, so we had to wait for a crane. My Greek being limited, I tried to explain with gestures that if 10 of the waiting men got together, we could lift the van onto the road in no time. Later, by chance, I read that extending even one hand with the fingers spread is a terrible insult in Greece. (The English use two, the Germans only one).

  4. Claudia Brehm (Monday July 4th, 2011)

    ….der Fehler bei der ach so schön einfach klingenden Geschichte ist, dass keine Zinsen für die Schulden berechnet wurden!!!

  5. Chris Wood (Tuesday July 5th, 2011)

    Yes, being serious, interest does make a difference. It seems that speculators have driven up the interest rate asked from Greece to about 14%. It is possible to do this by effectively betting on Greece defaulting in the fairly near future. This forces the banks to set very high interest rates to cover their risk. Similarly, bookmakers calculate things so that they are OK, whichever horse wins. The punters effectively bet against each other, (although the bookmakers do especially well when the result is unexpected)..
    It would be a short term disaster for Greece to go bankrupt, and a medium term disaster to accept such interest rates. Either way, it would also be nasty for the rest of Europ. So Greece had to be “rescued”. This has the nice side-effect of hurting the speculators, providing Greece is really rescued. The trouble is that the rescuers need to get Greece back into shape. One aspect is that the Greeks must work hard, pay their taxes and export, leading to a lower average standard of living for some time. I have little idea whether the main problem is with the grasping rich, with lazy workers, or just bad management. In any case, money is needed, at reasonable interest rates, for investment. Otherwise hard work will be in vain. But it is difficult for governments to persuade their voters to supply this money.
    There is another view, (Roland’s?), that limited disasters are beneficial. They stabilise in the same way that minor earthquakes may reduce the probability of a major one. Prosperity for all of Europe for the next few decades may bring a really big disaster as resources run out and the climate degrades.
    Ideally governments should carefully organise sustainable prosperity. This is made difficult by the need to gain and keep political power, whether or not by democratic means. Countries also need some military power to survive, either their own power, or that of friends.

  6. rd (Tuesday July 5th, 2011)

    Hi – das mit den Zinsen ist spannend.

    In der realen Welt scheinen ja die Zentralbanken zurzeit wohl zum Fast-Null-Zinssatz Geld an Banken zu geben, die dieses dann mit deutlichem Aufschlag weiter verleihen und so wieder ihre Schäden kompensieren.

    Wenn ich andererseits die Zinsen meiner Hypothekendarlehen (3 – 4 %) anschaue und dann die Geldentwertung in meinem persönlichen Konsumbereich schenke, habe ich real auch nur NULL-Zins-Kredite.

  7. Chris Wood (Tuesday July 5th, 2011)

    There is another reason why the story does not fit. The debts are not evenly distributed, (although the German national debt per head is similar to that of Greece). I believe that China is hugely in plus, whereas USA has a “huge” debt.
    But I assume that the USA debt is peanuts compared with the total assets of USA.
    I rarely see such figures, but I assume that most of the assets of USA belong to USA citizens. I recently read that the savings of Germans add up to 5 billion €, (5 million million, this is a European billion). This is about 60 thousand € per head. This includes life insurances, state papers, funds, shares, etc. But it does not include property such as houses, land, small firms, etc. (unless owned by companies that are AGs). No doubt there are further German assets, such as the roads.

    I guess that the total assets of Germany add up to about 10 billion, (120 thousand per head). This fits fairly well with the observation that the average person has a roof over their head, a place to work or learn, a piece of road, etc. even if somebody else owns these.
    The German national debt (4000 € per head?) is only a small fraction of this.
    I suspect that the Greek assets per head are significantly less (perhaps half?). For instance, they are short of fertile land.
    Of course the values of all the assets are subject to circumstance. Fertile land is suddenly very valuable when food shortages start. House prices drop if there are few children and prosperity drops. Arid Greek land will become more valuable, if they use it to collect solar energy. Almost everything is worth much less in a failed country.

    In every country, assets per head are even less evenly distributed than incomes. One reason is that old people have more than the young, having had time to save. The balance is corrected to some extent by democracy, where those without assets can vote. The poor have some power beyond their meagre assets also in other countries, for instance in N. Africa.

    I welcome correction by any better economist. I am no expert.

  8. Chris Wood (Tuesday July 5th, 2011)

    Yes, Roland, earlier it was possible for normal people to make a few real percent by intelligent investment. Now there are too many professionals skimming off the cream. Insider dealing is also ubiquitous.

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