“It is a slow day in a damp little Irish 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.”
This was sent to me as a joke via email from a friend. The problem is, that folk such as Paul Krugman would argue that this is sound economics. Happy Christmas!
If the debts are actually that easy to cancel, it’s perfectly valid economics.An influx of money allowed a debt loop too complex to be unravelled by anyone involved to clear itself up, and while an accountant may tell you that the credits and debits match, everyone genuinely would be feeling better about life at that point. The wealthy traveller’s temporary liquidity will, in the story, be both useful and productive. That’s not an attack on the Krugmans of the world, it’s a defence of them.
Of course, in the real world that’s very rarely the case, and there’s a host of other reasons why this sort of meddling is often a very bad idea. But this example doesn’t showcase your point at all.
Alsadius, you write utter nonsense. The story gives the example of €100 being used to pay off a series of debts owed by a group of different people many times over. It pays no heed to the fact that the folk receiving this sudden windfall also are supposed to be earning money by sales of services, incurring other debts, etc.
And if the guy in this silly story refuses to pay for the room and leaves, then the hotel owner’s €100 payment represents his falling back into debt, surely.
Ireland, like Greece and other places, is not getting a free gift of anything to wipe out its collective debt. There is no debt forgiveness programme in the offing.
The other flaw is that the 100euro was borrowed without permission and with no interest to cover the risk.
The Hotelier had ABSOLUTELY NO IDEA he was setting off a chain of events that would result in him getting his debts repaid.
Further, imagine if the German did not turn up and the Hotelier went to the Butcher and said “Fag Ash Lil owes me 100euro, so now she can owe you and I am in the clear…”.
Lets see how far that gets him, i.e. nowhere.
What if he set off the chain and the German came downstairs too soon. Prison, or does he suggest that Fag Ash Lil…
What MIGHT happen is that the Hotelier can sell his invoice to F-A L, but then again at below face as a result of what exists at the beginning: opportunity cost and risk.
JP,
You horrible man 😉 I was having a pleasant morning ’till I read that. I have a similar tale.
A few years ago I got a five pound coin in commemoration of something or other. No local retailer would accept it. Eventuially the post office did but before that the magic fiver operatd as a sort of token between my wife and I. I recall wondering if by exchanging this coin between us we were engaged in some sort of economic activity. Of course I was aware that no services were rendered or goods produced.
Anyway back to the Irish story. I think the thing that depressed me most is that actually it isn’t quite like that. The baseline of the tale does have genuine economic activity – prostitution and letting rooms for that purpose.
Perhaps more to the point… I follwed the recent European Court ruling on Irish abortion law. What struck me more than anything was “pro-lifers” living in fantasy land. They had placards and such proclaiming that this was a soverign Irish issue to be decided by their senate and supreme court and such. Well, not since the bail-outs it ain’t because nothing is. Von Rompuy can genuinely state of the Irish, “You’re my wife now!”
Anyway, Happy Christmas!
Not so. If you read the story, he doesn’t like the room and takes his money back.
It works fine so long as everybody pays a debt. As soon as somebody pockets their repayment, the chain collapses. IOW it relies on everyone in society owing as much as they are owed, which isn’t the general case.
“rich German tourist” … that’s the real joke … what’s the disposable income in Germany compared to the PIIGS ?
It works fine so long as everybody pays a debt. As soon as somebody pockets their repayment, the chain collapses. IOW it relies on everyone in society owing as much as they are owed, which isn’t the general case.
Well that surely is the point. If the guy at the end – the German tourist – decides not to pay for a room after all, and the hotel owner has paid his bills, etc, on the basis of receiving something that in fact he does not receive, then the whole thing falls apart.
Which is precisely what this tale is all about: the fantasy that we can make problems of debt magically disappear.
Johnathan, the german tourist TAKES HIS MONEY BACK AT THE END. The hotelier was paid by the courtesan.
IanB, now this is getting annoying. If the tourist takes his money back – he does not spend it on the room – then the owner of said has not been paid for anything. Ergo, the whole “chain” of payments is based on a mistaken assumption.
Dearie me.
Just thought I would point out that the same (or very similar) quote was made by somebody in the comment thread to an earlier posting. About a month ago.
Somebody pointed out in the comment thread that the fallacy is that there is no net debt in this situation, since everybody owes as much as they are owed. This was followed by lots of ‘of course’ and ‘Ahs’.
It is always the case that debt is a liability of somebody and an asset of somebody else. Net debt is always zero, globally. The problem is that there is an unwillingness to let the people who took on the debt to be bankrupted (e.g. Ireland) and repay what they can, and for those who lent the money to write off the rest.
The proper thing for the authorities to have done (and indeed, do; if interest rates go to normal levels I suspect some banks will be gone) is to facilitate an orderly bankruptcy of insolvent financial institutions. The financial authorities can stand by to prevent a complete meltdown of the financial architecture of the world, but thats it, no need for any bailouts or QE.
In real life, surely, the problem is that they owe all the money to the German in the first place?
This is sound economics. Let’s look at this another way:
There is no german tourist. The hooker comes to the hotelier and says “hai, i owe you €100, but the barkeep owes me €100. how about i tell barkeep to pay you instead of me and we call it quits.” The hotelier says “sure.” The hotelier then uses this same policy and goes to the butcher and says “hey, I know I owe you €100 but the bartender also owes me €100, how about I tell him to pay you instead and we call it quits?” The butcher says: “fo sho!”
The bartender heads to the farmers co-op dude says “hey, I owe the butcher €100, and you owe me €100. how about you pay the butcher and we call it quits?” The co-op guy goes, “Certainly, Comrade, for the motherland!”
The farmers co-op guy goes to the pig farmer and says “Greetings Comrade, I know you owe me €100, but I too am indebted to the filthy capitalist butcher for the sum of €100. How about you pay him instead and we call it quits?” and the farmer goes: “lols, he owes me €100 too, so sure!”
No German tourist required. The town was solvent, just required securitisation to resolve the chain of debts.
This is nothing like the bail-out.
Furthermore, even with the german tourist, no new money has been added to the system. No one has produced anything, but neither has anyone got any richer either.
Pre-tourist, each actors’ balance sheet looks like:
Assets === Liabilities
—————————
€100 | €100
Total: €0
After the Tourist, each actors’ balance sheet looks like this:
Assets === Liabilities
—————————
Nil | Nil
Total: €0
It certainly is getting annoying Johnathan, since you have not and apparently refuse to read you own posting. I quote-
If you still don’t understand how this scenario works, try collapsing the chain to two people: A owes B £100, B owes A £100. The debts cancel.
During the Irish bank strike in 1978, people made up for the shortage of Bank of Ireland notes by passing cheques from hand to hand. I.e. a shortage of something to serve as money can constrain economic activity. But of course this is quite different from Ireland’s lack of competitiveness vis a vis Germany, and the problems with its too big to fail and fraudulently run banks.
They don’t cancel, Ian, for the simple reason that the man who paid the money over at the start, of €100, eventually decides he does not want to do so, so he takes that €100 back. In the meantime, all the other debts in the chain have been paid on the assumption, by the first member, that he was getting paid. But he hasn’t. When the hotelier’s lack of €100 becomes evident and he has paid people on a false assumption, the whole sequence unwinds.
The crucial thing about this tale is the final act: the tourist TAKES HIS MONEY AWAY.
Good grief Johnathan, please read your own damned posting. The hotelier was given the £100 back by the prostitute, and he then puts it back on the desk for the tourist to take away with him. You really are being quite the bonehead about this.
Try this; arrange several objects such as mugs on your desk to represent the people. Now take a tenner out of your pocket, and move it around from mug to mug, then when it has visited all the mugs, put it back in your pocket. Same thing.
There is no problem with the example as it stands. The Irish town is suffering an illiquidity problem. It is solvent. Net debt within the town is zero. All that is happening within this example is that the German is providing some liquidity. The problem with the PIIGS is that they are insolvent; its not just a liquidity problem.
Johnathan, you really must read my explaination of how this debt situation can be resolved without the tourist. PeterT puts it in proper economic terminology.
The only thing remotely dubious about the scenario would be if the hotelier wasn’t aware that he was going to get the €100 back, but as far as I know “intent to defraud” isn’t a crime in and of itself.
It’s actually an excellent example of exactly what’s going on in Ireland. And elsewhere.
The tourist’s money was not the inn-keeper’s to take in the first place. No services rendered.
Re-think the experiment – say that the innkeeper had picked the man’s pocket while his attention was averted, in order to start this chain of events. In other words, he found someone to ‘lend’ him the money – at no interest, and with pretty lousy security.
That’s exactly how the debt crises in Ireland and elsewhere are going to be ‘solved” – by ‘borrowing’ (at poor interest and lousy security) from an unsuspecting lender (our posterity/the Germans) who would never agree to the terms if he knew what was being done to him.
In the story, the tourist gets his money back. What are the odds for the PIIGS, would you say . . . . ?
llater,
llamas
Actually, what happens is this: The hotelier pays the butcher, and Obama says, “Filthy capitalist pig. Pay your taxes.” Now the butcher has only $60, which he uses to pay the pig farmer, and Obama says, “Rich pig, give it back to the community.” Now the pig farmer has only $20. Which he pockets, because it makes only a dent in what he owes the feed and fuel guy. The government say, “Look, we just made $80. The bailout is working.”
Uncle JP,
Ian B and sconzeny have it. The town is suffering from a liquidity problem is all. Read the scenario as follows, the innkeeper borrows €100 from the German, uses it to improve liquidity throughout the village, expediting payments and the resulting velocity of the money is such that it gets back into the innkeepers hands in time to allow him to repay his final debt to the German before he comes back downstairs.
If any one person in the chain had declared insolvency before this happened they all would have been, but because one person became liquid, with funds borrowed from outside, all became sufficiently liquid to clear up the entire chain of debt.
It really is just all about liquidity and velocity of money.
Simple really.
It fails as an analogy for it ignores the considerable cost of every single bureaucrat who has been hired and paid to handle the transactions. The overhead is massive and completely ignored in the ‘analogy’, as if those involved in addressing the Irish issue were benevolent souls working entirely for free and without any additional costs whatsoever.
To make it a true analog, the hotel owner would have to pay someone 15% or so to carry the money to the butcher, who has to pay 17% to someone to carry the money over to the pig farmer who then has to pay someone 20% to carry the remaining bit of money over to the feed and fuel supplier, plus taxes and service fees. The feed and fuel folks then have to pay taxes on current and past inventory, pay 23% to someone to carry what’s left of the money over to the next party, and so on.
Ultimately, the German declares war for having had his funds stolen.
But of course the real reason the analogy fails is who ever heard of a prostitute extending credit?
no hugs for thugs,
Shirley Knott
What is missing in the discussion of this scenario, and whether or not it reflects stimulus/QE, is that in this scenario each debt is accrued in exchange for a productive output (either service or good) – this is why, in the end, everyone’s debts net out, b/c in this small society production increased to match consumption. What is missing in this scenario is monetary inflation/creation and fractional reserve banking multiplication of credit not tied to any real expansion of the economy.
@Shirley “But of course the real reason the analogy fails is who ever heard of a prostitute extending credit?”
This is probably a feature of the inherent anonymity, and illegality of the market. In a small village, the hooker could credibly promise to publicly humiliate the publican if he did not pay up in a timely fashion. Or, if prostitution were legalised, the hooker could pursue the publican for his debts in the courts.
Seriousness aside, I’d love to see the branding on a brothel’s co-branded credit card. X-D
In the story, each individual apparently has a net balance of zero, so the debts and credits can all be canceled (with or without the help of a German tourist). In the real world, some individuals have more debt than they will ever repay, and consequently debt priority is important. Someone is not going to be paid in full.
A government bailout means that politically favored groups get to cut in front in the line to be repaid. That’s all.
JB,
I think what this story is supposed to represent is that each of the “businesses” in the story is really a bank. It’s saying what supposedly happens if you provide liquidity to banks. It doesn’t represent the productive economy. It’s all about banking, not productive business.
So I guess in theory the idea is that all the banks in toto have a net balance of zero, but are all in debt to each other like the businesses in the story, so if you give them a pulse of liquidity it can pass around the circle jerk and clear the debts the banks have to each other. It doesn’t of course clear the debts producers have to the banks, because producers don’t count. Everything for the past two years has been about trying to clear the banks’ debts, not everybody else’s.
But anyway. I think that’s the idea. Since the banks have nearly all the money in the economy, represented as debts on their balance sheets, sufficient liquidity supposedly would clear the banks’ debts.
Which is probably also bollocks, but fiat FRB makes my head spin TBH. Whatever, the story’s not really about productive butchers, hoteliers and courtesans, it’s about banksters.
Besides whatever internal analysis of the situation may show that it is invalid, it is evident that no wealth has been produced in the sequence of events.
No food, or clothes, or buildings, or anything of actual use to humans has been created. People have to eat!
It was all simply a game of exchanging paper, not producing anything.
It is a con as Keynesianism is a con and the trick works the same way.
But one just has to look outside the system to see the unreality of it.
Reading all the comments, at least I now understand why we all got into this mess in the first place. B^)
The most sensible comment here is Dom’s.
Of course, the problem would all be solved with a Land Value Tax.
Had the hotel owner and the hooker been thinking like entrepreneurs and not gummint bureaucrats, they quickly could have turned this into a free-market bonanza.
They should have immediately agreed to form a partnership, bargaining with the German that the room included meals and the hooker’s services for the evening. That enticement would have sealed the deal. The pub owner could have been brought in as a silent partner.
The German would have been happily bedded, fed, lubed and screwed, all of the town’s debts would be settled. The bartender, with reduced rates for tourists, could have done successful separate negotiations with the German (2 pints for the price of 1) and the hooker and hotel owner would each have 50 Euros to spend in the local economy.
Win-win.
Actually, the real problem is with fiat money. If the town were working under a barter economy, they’d all see that they have no net debts.
@Johnathan Pearce: You should really read your own words before you post them.
@sconzey: Good analogy with the debt transfers, that’s exactly what I was getting at.
@John B: Who claimed that wealth was being produced? People claimed that a bunch of debts got cleared up, which is literally true. This was about balance sheet simplification, not wealth production, and in the scenario the temporary liquidity did that job admirably.
@Ted Schuerzinger: If they working in a barter economy, there wouldn’t be any debts, because none of the trade that created the debts would have happened in the first place. This is not an improvement.
Alasdius.
Well it may or may not have cleared the balance sheet up but it did not provide any benefit to anyone.
So it doesn’t really help, does it?
It describes a flow system but it does not promote or ‘create’ prosperity.
It really rather shows up the flaw in current economic thinking wherein liquidity is seen as the necessary requirement, and the absence of liquidity is cast as the villain, the problem.
Balance sheets are a record, a means of control. They are useful as a story about what has happened.
But they are not reality.
People shuffled some paper. Fine. The circuit it made may have been described but nobody benefited.
Or am I being thick and this was just supposed to be about sleights of hand?
Given the choice between owing and being owed a sum of money, or neither, any sane person will choose neither. Debts owed are always uncertain(and damnably illiquid), debts owing are far more certain. Even standard accounting practice prefers them to be cleared up – there’s always an allowance for doubtful accounts on the balance sheet, because a debt owed can’t be trusted 100%. So in fact, the loan of liquidity made everyone involved richer, even by an accountant’s math, because it unwound a circle of debt that served no purpose and thereby added certainty to everyone’s assets. It’s not a huge benefit, but it is a benefit to all involved.
It seems to me that anyone who doesn’t see the flaw in that “logic” would also have a problem with this.
OMG, Laird, you are either a total masochist or an irreparable optimist…
Are the two incompatible?
OMGx2!
But, but, but, wealth had been created, services had been rendered. The only issue is that the goods and services had been exchanged for a promise to pay on some future date, not immediately.
Well, in this scenario the future date arrived nigh on simultaneously for each debtor. If no goods and services had been exchanged in the past there would have been no current debt.
In fact, the problem could have been solved if each debtor had written out an IOU to each creditor and these had then been exchanged and canceled.
Or even one IOU, treated as currency, would have done the job.
Shirley Knott- there is a flaw in your slogan. Maybe people are antisocial because of there bad treatment from society! If you give a hug to a thug, you might make him or her a better person. If fascists had friends, they wouldn’t be dictators.
Give a thug a hug!
This in fact is the premise of the 1937 short film The Grand Bounce: a man who has a $1,000 gambling debt writes a post-dated check from an account which doesn’t have the $1,000; which, through a series of coincidences, gets transferred from one person needing to spend a thousand dollars to the next, and winds up with the original person.
Unfortunately it doesn’t seem to be on DVD or Youtube.
IanB is on the right track with “I think what this story is supposed to represent is that each of the “businesses” in the story is really a bank.” Not quite, but throw in a bank in there among the other villagers. The de-leveraging that has happened is good for the producing entities, but horrible for the bank – remember, bank accounting is inverted. For a bank a loan is an asset, not a liability.
Hence, the idea of the bailouts is not really to induce the banks to offset intermediated loans. It is to induce hoi polloi – businesses and individuals – to stop de-leveraging. The sheep must be convinced that they need credit, that living within one’s own means is a horrible thing. This is the good ole Fallacy of Composition, but cleverly collapsed to omit the bank – see this. Money quote: “Economists tend to be divided into two groups. The first sees the economy as a perpetual motion machine that magically grows even as people consume down the capital stock (which replenishes itself and even expands on its own, just as long as consumers continue to spend). The second sees economic growth occurring only because people save for the future and create new capital that matches with consumer needs and desires. It does not take a genius to recognize the “bad” economists and the “good” ones.”
Honorable mention to Shirley Knotts for the point about frictional costs.
Basically, it boils down to this: in the example, as stated, the temporary (!) liquidity injection works. But there is a good reason why we are talking about a small town, and not an economy. If you can assume away a whole lot of pesky features of the real world – taxes, transaction costs, human nature and motivation, economic distortions from excess liquidity, asset depreciation and capital expenditures, etc. – then Keynesianism works beautifully. Nobody really denies that, and it makes for stimulating mental calisthenics. Meanwhile in this dimension, on planet Earth…
Y’all are missing the forest for the trees, or rather, are confusing currency with what it represents, i.e., wealth. It was correctly pointed out by a few that no wealth was created, but the thought wasn’t followed through on why that matters.
It matters because, although you can certainly say that the town’s debts were all settled and they feel better about themselves, they have no net wealth increase with which to make future purchases. They all must re-incur debt to eat, buy stock, get drunk, get laid, etc. The fact that their debt is smaller that it otherwise would have been is perfectly offset by the lack of other accounts receivable–i.e., diminished expectation of future income. So one day later they’re right back to where they started from.
Except they’re actually worse off, because they’re one day older. The innkeeper must change the light bulbs and fix the leaks, the butcher’s and barkeep’s stock is spoiling and must be replenished, the farmer’s product (and the prostitute’s for that matter) is aging. Their physical plant is depreciating and losing value, with no increase in wealth to offset the loss or replenish the infrastructure.
Thirdly, lest anyone argue that all it takes is a new German tourist every day to keep the system afloat, the increase of the velocity of currency circulation will cause distortions in supply and demand, leading to inflation, which is not just an increase in prices but an actual devaluation of the value of the currency (because there is an increase in prices without a corresponding increase in the amount of actual wealth that the currency represents).
If this sort of system actually worked, no one would know who Charles Ponzi is, and Bernard Madoff would still be a free man. But it doesn’t work, and the fact that even a substantial number of the enlightened readers of Samizdata were buffaloed by it demonstrates how easily people are tempted by the lazy thinking of feel-good plastic banana Keynesianism.
Todor, I don’t think this tale is supposed to explain an economy in general. It’s supposed to explain how an injection of liquidity into the banking system could eradicate or reduce the debts of the banks. That’s why I said above the hotelier, the hooker, the butcher etc actually all represent banks. The idea is that because the banks effectively hold the entire money supply, all their debts to each other ought to be cancellable- if the analysis that the banking system ground to a halt due to debts owed by banks to each other is a valid one.
@IanB: I’m kinda cheating because I’ve heard this before, just told as a joke, so at first it was hard to see the analogies; but yes, I think in the spirit in which it was originally intended, this was supposed to abstract away the “productive” part of the economy and talk about the circular debts in an FRB banking system.
Mencius Moldbug argues that the best way to resolve this is to nationalise the banks (hedge funds, etc.), resolve the circular debts, transfer over to a metallic standard, and then sell the banks assets back into your brand shiny new unregulated free market financial system in a dutch auction.
For the curious: http://unqualified-reservations.blogspot.com/2008/09/maturity-transformation-considered.html
This idea of putting the entire financial system into effective receivership crops up repeatedly and all of his essays on economics warrant a read; even if you disagree with everything he says you’ll still learn something (kinda like Common Lisp). They’re enumerated under the heading “Economics” here: http://moldbuggery.blogspot.com/
Are not the “debts of the banks” caused by Banks using securities of inconsistent liquidity and variable value as “reserves” against lending instead of M0?
As for the IOUs, this totally ignores the risk element which I mentioned. The butcher’s IOU is probably more likely to sell at face than the Prostitute’s.
As others have mentioned, all it needs is someone along the chain to decide to save the money and not spend it and the chain is broken.
The money was taken without permission, used in a risky venture without compensation. It is fraud.
Moral of the little story: larceny is can be beneficial to society.
Also redistribution of wealth is involved in this scenario. As others stated if one keeps the money and doesn’t pass it on then the hotelier would not have the money to return to the German tourist. If the German tourist doesn’t get his money back he cannot pay his future expenses like gas for his car or a restaurant bill. A bailout to the hotelier is needed to protect the chain of other debt payments so he can give the German his money without recalling the other debt payments. The hotelier is now too big to fail as it will affect too many in the chain of events. The bailout incurs a deficit. The deficit will be paid back by the tax payers with the wealthiest 1% paying the largest amount, redistributing their wealth.
Jane, if you think the wealthiest 1% pay much tax (ok, VAT perhaps), then you are mistaken IMHO.
As the late George Carlin said “The upper classes keep all of the money and pay none of the taxes. The middle classes pay all of the taxes and do all of the work. The poor are there to scare the shit out of the middle class…keeps them turning up at their jobs”
And if you are a net beneficiary or paid from tax revenue, you are not really paying taxes.
Tim Carpenter wrote:
‘Jane, if you think the wealthiest 1% pay much tax (ok, VAT perhaps), then you are mistaken IMHO.”
If we are discussing income taxes paid by the largest earners (which is one, but not the only, definition of ‘wealth’) then your opinion is grieviously misplaced.
For example, in the US, the highest-earning 5% of the population (AGI > than $160K) paid almost 60% of the total income tax receipts (TY 2008).
Figures for the UK are a lot harder to come by but it would appear that in TY 2008, the highest-earning 10% of the population paid almost 60% of the total income tax receipts.
The ‘wealthy’ pay the vast majority of all income-based taxes. A very large proportion – around 50% – of the population in both nations effectively pays no income-based taxes at all.
llater,
llamas
The top 5% are a world away from the top 1%, I’d wager.
As for the maths teaser, it only makes sense if you are innumerate. Taking the equation at any point (doesn’t matter where, the principle is the same):
2(a-x) = a-x
But a=x, therefore:
2(0) = 0 or
0=0
Come to think of it, the “2-1” apparent paradox is probably at the root of much of the AGW calculations…
Actually Kim, it makes perfect sense even if you are numerate: that link is a simple demonstration why 0 divided by zero is undefined.
That was my whole point in posting the cartoon. People who can’t figure out that you can’t divide by zero (or who are so confused by the algebraic expressions that they don’t recognize that it is trying to divide by zero) are also likely the same sort of people who would be taken in by the pseudo-economics in the little story.
Problem, mathfags?
Laird, you can divide by zero (which is to say that is not undefined – it is defined as infinity), what is undefined is zero divided by zero.
Nit-picker!
Ah, the old pattern obtains:
A) Ludic fallacy (creating a game of something and then using it as a parable of real life when no such comparison exists–Keynesianism/accelerated cashflow as musical chairs).
B) Ad hominem.
C) Complex issue boiled down to slogans.
Festivus to All!
Accept the musical chairs Irish pass the 100 Euro note story might (at first glance) seem to make sense – whereas Keynesism makes no sense at all (not even at first glance).
There is no net debt (everyone is owed what they owe). All this story illustrates is how the use of money is superior to bartering as it eliminates the problem of double coincidence of wants.