I'm rubbish at finance so don't understand this.
Discussion
This was presented to us at work for discussion today.
Bloke goes into a hotel and says I want to check out your rooms, here's £100 deposit.
Hotel manager says great and rushes to pay the butcher the £100 he owes.
Butcher says great and rushes to pay the candlestick maker the £100 he owes him.
Candlestick maker says great and rushes to pay the hooker the £100 he owes her.
Hooker says great and rushes to pay the Hotel the £100 she owes it.
Bloke comes down and says 'don't like the rooms', get's his £100 and leaves.
As far as I can see 4 people have had a £100 debt paid and are all happy with it and the bloke's got his £100 back.
Is it as simple as I am seeing or what am I missing? I suggested that the bloke actually gave the hotel an interest free loan for a short while. Colleagues say that the debts still exist, but couldn't say why or where.
Bloke goes into a hotel and says I want to check out your rooms, here's £100 deposit.
Hotel manager says great and rushes to pay the butcher the £100 he owes.
Butcher says great and rushes to pay the candlestick maker the £100 he owes him.
Candlestick maker says great and rushes to pay the hooker the £100 he owes her.
Hooker says great and rushes to pay the Hotel the £100 she owes it.
Bloke comes down and says 'don't like the rooms', get's his £100 and leaves.
As far as I can see 4 people have had a £100 debt paid and are all happy with it and the bloke's got his £100 back.
Is it as simple as I am seeing or what am I missing? I suggested that the bloke actually gave the hotel an interest free loan for a short while. Colleagues say that the debts still exist, but couldn't say why or where.
Kudos said:
The hotel manager is down £100 - gave £100 deposit back and also paid the butcher. The bloke coming in is irrelevant as the hotel manager must have had the extra £100 somewhere
Inventing money from nowhere to keep the whole show on the road, there's a job as a central banker there!
Kudos said:
The hotel manager is down £100 - gave £100 deposit back and also paid the butcher. The bloke coming in is irrelevant as the hotel manager must have had the extra £100 somewhere
Yes, but on the face of it, the £100 he paid the butcher is replaced by the £100 the hooker gave him and the tourist effectively gave him an interest free loan.Tyre Smoke said:
Kudos said:
The hotel manager is down £100 - gave £100 deposit back and also paid the butcher. The bloke coming in is irrelevant as the hotel manager must have had the extra £100 somewhere
Yes, but on the face of it, the £100 he paid the butcher is replaced by the £100 the hooker gave him and the tourist effectively gave him an interest free loan.But that feels like someone somewhere has been cheated. But I can't see who.
JB! said:
surely all parties are settled up, except the hotel?
the hotel start £100 down, due to the hooker, the cash injection starts the chain reaction that sees everyone paying each other meaning the hotel get their £100 back, but then have to pay out £100 deposit.
Ok, but is it different if the hooker pays the hotel first, and then the circle continues back round to her and there is no bloke in the hotel?the hotel start £100 down, due to the hooker, the cash injection starts the chain reaction that sees everyone paying each other meaning the hotel get their £100 back, but then have to pay out £100 deposit.
silverthorn2151 said:
JB! said:
surely all parties are settled up, except the hotel?
the hotel start £100 down, due to the hooker, the cash injection starts the chain reaction that sees everyone paying each other meaning the hotel get their £100 back, but then have to pay out £100 deposit.
Ok, but is it different if the hooker pays the hotel first, and then the circle continues back round to her and there is no bloke in the hotel?the hotel start £100 down, due to the hooker, the cash injection starts the chain reaction that sees everyone paying each other meaning the hotel get their £100 back, but then have to pay out £100 deposit.
the hotel go from -£100 to £0 then back to -£100 when they pay the butcher?
Everyone (apart from the "Bloke") has £100 debt and £100 credit. They all cancel out.
The blokes £100 just provides some temporary liquidity to allow them all to receive their credits and pay their debts.
Another way to resolve it would be:
Hotelier wants his money back from the hooker, she tells him she's owed £100 by the candlestick maker and he should get it from her.
Hotelier asks the candlestick maker, who tells him he's owed £100 by the Butcher, and he should get it from him.
Hotelier asks the butcher, who reminds him of the £100 the Hotelier owes him, and they call it quits.
Cheers,
FT.
The blokes £100 just provides some temporary liquidity to allow them all to receive their credits and pay their debts.
Another way to resolve it would be:
Hotelier wants his money back from the hooker, she tells him she's owed £100 by the candlestick maker and he should get it from her.
Hotelier asks the candlestick maker, who tells him he's owed £100 by the Butcher, and he should get it from him.
Hotelier asks the butcher, who reminds him of the £100 the Hotelier owes him, and they call it quits.
Cheers,
FT.
Fume troll said:
Everyone (apart from the "Bloke") has £100 debt and £100 credit. They all cancel out.
The blokes £100 just provides some temporary liquidity to allow them all to receive their credits and pay their debts.
Another way to resolve it would be:
Hotelier wants his money back from the hooker, she tells him she's owed £100 by the candlestick maker and he should get it from her.
Hotelier asks the candlestick maker, who tells him he's owed £100 by the Butcher, and he should get it from him.
Hotelier asks the butcher, who reminds him of the £100 the Hotelier owes him, and they call it quits.
Cheers,
FT.
wow.The blokes £100 just provides some temporary liquidity to allow them all to receive their credits and pay their debts.
Another way to resolve it would be:
Hotelier wants his money back from the hooker, she tells him she's owed £100 by the candlestick maker and he should get it from her.
Hotelier asks the candlestick maker, who tells him he's owed £100 by the Butcher, and he should get it from him.
Hotelier asks the butcher, who reminds him of the £100 the Hotelier owes him, and they call it quits.
Cheers,
FT.
well put!
even I understand that!
There's no debt to start with. If everyone in the group owes each other exactly the same amount of money, none actually owe any money to anyone else - If I owe the garage £100 and he owes me £100 we owe eachother nothing. It's simply the way the tale is constructed makes it look otherwise. All the hotelier has done is used the deposit to start the process of eveyone writing off their imaginary debts.
silverthorn2151 said:
Blimey. My trouble is that EVERY view and opinion on it sounds perfectly logical.
Just as well I don't trade derivatives (whatever that is, and no, I don't want to know) if I can't follow this simple model.
Is is an example though of just how nebulous the world of finance is?
No, it's simply the age old principle of double entry book-keeping - to work out what you owe you have to subtract what you are owed.Just as well I don't trade derivatives (whatever that is, and no, I don't want to know) if I can't follow this simple model.
Is is an example though of just how nebulous the world of finance is?
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