Keynesian Economics Explained

Keynesian Economics explained:
 
An Englishman wonders into an impoverished French town and stops at a local hotel to get a room for the night. He hands the owner a 100 pound note, takes his key and heads up the stairs to his room. The hotel owner immediately rushes out the door to visit the butcher saying, "I have debts to pay."
 
"Butcher" he says, "here is the 100 pounds I owe you for the meat you delivered last week. This covers my debt in full."
 
The thankful butcher sprints out the door and over the bakers shop saying, "I have debts to pay."
 
"Baker" he says, "Here is the 100 pounds I owe you for the bread you delivered last week. This covers my debt in full."
 
The grateful baker slips out the back door and down the alley where he hands the prostitute the 100 pound note. "Here is the 100 pounds I owe you for services on credit. This covers my debt to you in full."
 
While the baker heads back to his shop, the prostitute hurries down the street to the hotel where she finds the owner behind the counter.

"Mr. Hotel Owner", she says. "Thank you for letting me have that room on credit. Here is the 100 pounds I owe you. This pays my debt in full."
 
As she walks out, the Englishman comes down the stairs and approaches the hotel owner. "Sir", he says, "the room really isn't up to my usual standards. I'd like my money back." So the hotel owner hands the Englishman the 100 pound note who then leaves the hotel.
 
Everyone is suddenly debt free. Something is going on here but no one is really sure what happened. It seemed to work on some level but something weird is going on.
 
(I'd love to give someone credit but I can't remember where I first heard this outstanding explaination - Todd)
 
"By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens."
~John Maynard Keynes

"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
~John Maynard Keynes