Global Financial Crisis - Solution

Suppose there is a very small town in Pakistan where it is raining so there is not too much business happening. Everyone is heavily in debt. Luckily, a rich Saudi tourist (named Abdullah) arrives in the foyer of the small local hotel. He asks for a room and puts a US Dollar100 note on the reception counter, takes a key and goes to inspect the room located up the stairs on the third floor.

The hotel owner takes the banknote in hurry and rushes to Khanani & Kalia (which is banned but I am using it for simplicity) to convert 100 US Dollars in to PKR 80,000. Then he goes to meat supplier to whom he owes PKR 80,000.

The butcher takes the money and races to his wholesale supplier to pay his debt.

The wholesaler rushes to the farmer to pay for animals he purchased some time ago.

The farmer triumphantly goes to Red Light area and gives the cash to a local prostitute who gave him her services on credit.

The prostitute goes quickly to the same hotel, as she owed the hotel for her hourly room use to entertain clients.

At that moment, the rich Saudi is coming down to reception and informs the hotel owner that the proposed room is unsatisfactory and takes his USD 100 back and departs.

There was no profit or income. But everyone no longer has any debt and the small town people look optimistically towards their future.

COULD THIS BE THE SOLUTION TO THE Global Financial Crisis? Or, is there a catch here?!!

Yes, there is a catch. US$100 ~= PKR8000.

The hotel owner should wait for 10 such customers to make up PKR80,000 before running off to pay his loan.

yes.... you are right

I made a mistake.... I should have used 8,000

sorry about that

The assumption that all transactions are of the same value is not true. If it were true, barter system would still be in use.

Correct....

You see people have made life so complicated that now we are seeing growing number of crises day by day. Had it been a simple life, with no fancy transactions being executed, life would have been much simpler. I feel all these so called MIT, Harvard graduates who come up with so many fancy financial modelings, this all is going to lead to disaster.

Read this how simple transaction with fancy caveats has cost so many dollars to Milan

http://www.economist.com/finance/displaystory.cfm?story_id=13579036