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Money go-round you magazine BRANCH MANAGER BY JOHN MOORE
W
e all hear economists talk about interest rates rising and falling, how the dollar effects this and that, and how many times a dollar can be spent. Many people say they do not understand economists and what they say. I remember years ago listening to an economist speak and he started talking about how money goes around. So I thought I’d share that story with you and make you think about how many times a dollar can change hands. It went a bit like this:
Joe arrives into a small town, he is tired and looking for a hotel to stay the night. Joe finds a hotel and asks for a room. The hotelier says the room is $100 for the night, knowing full well he has an account to pay to the grocer for $100. Joe pays the $100 dollars to the hotelier for the room and goes upstairs. The hotelier now has the $100 to pay the grocer for the groceries and runs down the road and pays the grocer. He returns to the hotel happy and satisfied that he has paid his bill. The grocer now has the $100, he realises he hasn’t paid the butcher for his weekly meat order so he immediately runs over to the butcher and pays him the $100 for the meat. The grocer returns to the grocer shop happy and satisfied that he has paid his bill. The butcher now has the $100 and remembers he didn’t pay the hotelier for the night of Valentine’s Day that he and his wife spent at the hotel. So he immediately runs over to the hotel and pays the hotelier the $100. The butcher returns to the butcher shop happy and satisfied that he has paid his bill. This leaves the hotelier back with his $100. Then Joe comes downstairs after having had a good look at the room upstairs and says to the hotelier: “No I don’t think I’ll take the room
for the night” The hotelier says “that’s not a problem” and refunds Joe his $100. Joe leaves. While the hotelier is disappointed that Joe didn’t take the room he’s happy that he’s paid his account to the grocer and the grocer is happy that he’s been paid and that he’s paid his account with the butcher the butcher’s happy his account has been paid by the grocer and happy that he’s paid his account with the hotelier and, of course, the hotelier is happy that he’s been paid by the butcher for the Valentine’s Day night out. So what has happened here? Have a think about it, is this the money go-round we hear about? Naturally when everyone is paid everyone is happy and the economy is strong. You could say this never happens but it does show how many times a $100 can be spent. How would the hotelier, grocer and butcher have been feeling if Joe hadn’t paid in advance before looking at the room? Have a great day.
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