How a Bailout Works

Note: I found this fascinating anecdote posted as a comment to an online news article; the author is unknown. I took the liberty of modifying it to reflect a U.S. setting rather than European one. Conceptually, it reminds me very much of M.C. Escher’s “Waterfall” lithograph, except that if “Waterfall” is simply an illusion, how is it possible that the below could be “real”?:

The rain beats down on a small Kentucky town. The streets are deserted. Times are tough. Everyone is in debt and living on credit.

A rich New Yorker arrives at the local hotel, asks to view its rooms, and puts a $100 bill on the desk. The owner gives him a bunch of keys and he goes off for an inspection.

As soon as he has gone upstairs, the hotelier grabs the bill and runs next door to pay his debt to the butcher. The butcher hurries down the street to pay what he owes to his feed merchant. The merchant heads for the bar and uses the note to pay off his tab.

The bartender slips the note to the local hooker who’s been offering her services on credit. She rushes to the hotel to pay what she owes for room hire.

As she puts the $100 bill on the counter, the New Yorker reappears, says the rooms are unsuitable, picks up his $100 bill, and leaves town.

No one did any work. No one earned anything. Everyone is out of debt. Everyone is feeling better.

And that is how a bail-out works.