I am lost in reasoning the following joke:

Posted on Quora by Lynda Clarke

THE £50 pound note

It's a slow day in the town and the streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A tourist visiting the area drives through the town, stops at a hotel, and lays a £50 pound note on the desk saying he wants to inspect the rooms upstairs to pick one for the night. As soon as he walks upstairs, the hotel owner grabs the note and runs next door to pay his debt to the butcher.

(now... pay attention)

The butcher takes the £50 and runs down the street to repay his debt to the pig farmer. The pig farmer takes the £50 and heads off to pay his bill to his feed supplier.

The guy at the supplier takes the £50 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.

Now, the hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the £50 back on the counter so the traveler will not suspect anything.

At that moment the traveler comes back down the stairs, stating that the rooms are not satisfactory, picks up the £50 pound note and leaves.

No one produced anything and no one earned anything!

However... the whole village now thinks that they are out of debt and there is a false atmosphere of optimism and glee!

And that, my friends, is how a government works!

I think the joke is there's only faulty reasoning going on.

The whole story can be condensed down to: The hotel owner forgave a £50 debt.

I don't see anything related to the government's monetary policy in that statement.

The joke writer perhaps needs to take an intro to macroeconomincs course and learn about the the velocity of money and money supply; both of those are influenced by governments - certainly supply in most economies could be considered controlled by. But those really doesn't apply here.

I was hoping by the time I got to the end of my comment I could think of a punch line to make it in to an actual joke...maybe add while wearing a clown costume?  

Yes, that is true, but also, the other debts have been extinguished!  The net state of the world has indeed affected several people . .  that's money flow.

The only problem is that your story misses one thing (and probably what you are missing too) : the hotel owner is a thief !

The man visiting the room NEVER gave him the money : he just left it on the counter for the time he was visiting the room. So in fact, the hotel owner paid something with money he does not own. However, all the other people paid their debt with money they got "honnestly"

So technically, there is a -50 pounds at the beginning of the round, not 0. That's where the math trick is.

If you want, I have another story of the same kind :

A man enters in a bar and asks for a cocktail. The waiter brings him the cocktail and at this moment the man refuses it and says "sorry, I ordered a cocktail, but I wanted a whisky". The waiter turns back with the cocktail and brings the man a glass of whisky.

The man drinks the whisky, then stands up and leave. The bar owner then calls him saying "hey, you did not pay for the whisky!" The man answers "of course, I got it in place of the cocktail". The bar owner then says "you did not pay the cocktail too". And the man replies as he leaves "I did not have to pay it, I did not drink it"

Try to find where the math error is...

(Beside this, lamabrew is right : I don't see what the government related stuff has to do in such a forum...)

No - all the debts in the loop cancel out with or without the £50 note. All the £50 note does is act as a token that circulates and ‘clears’ the accounting. The hotel owner is not a thief since the visitor leaves with his £50. The whole debt cancellation could have been worked with a circulating iou instead

That sounds plausible indeed.

The only issue I disagree with is the final conclusion saying "No one produced anything..." they all did their work based on promise.

It is fascinating that we use money everyday but we do not quite understand its actual meaning.

>> the whole village now thinks that they are out of debt...

They not only think they are out of debt, they are out of debt. However, because the debt was circular there was no effective debt in the system to begin with. 

If...

A owes B 1$, and

B owes C 1$, and

C owes A 1$, then

(1) nobody really owes anybody, but

(2) since nobody can see the entire system (imagine this being billions of people with billions of transactions), money is awfully convenient. I think and hope that was kind of the point of the story, maybe.

I don't think there was any false sense of optimism and glee. Everybody was a borrower and everyone was a lender, okay.