Neal Boortz told a story puzzle about a hundred dollars being passed around a town, to paraphrase somewhat:
A Guest pays a $100 bill to a Hotel Keeper, on a condition that if he does not like the room, he will reclaim his money and stay elsewhere. The Hotel Keeper uses the money to pay a bill from his Butcher, who does the same to his debts, et cetera until the $100 is used by a past guest to cover an outstanding bill for stay to the Hotel Keeper. Then, the Guest complains about the room and re-claims the bank note.
The “point” of the story is that a number of debts are cleared, but the money is in the same hands at the end of the story as it was at the beginning of the story, and as told by Boortz, this is apparently intended to underscore null economic action related to “stimulus” efforts, implying that there is an economic loss along the line.
Let us see that each debt is partnered with a credit. The Hotel Keeper, for example, owes $100 because he gained $100 in product and service from the Butcher. Before the Guest appeared, this ring of local businesses was in a zero-sum state where each member was holding someone else’s $100 of value as a consumed good or past service.
The reason money as we know it exists, and is called currency, is because it has one unique attribute: anyone and everyone is (by common social agreement) willing to accept it, even when it is primarily useless matter such as gold, which is only good at being shiny and coating electrical contacts. The story’s circle of debts was trapped in a high-energy state because each debtor lacked a means to settle the $100 owed that its creditor would or could accept.
By effectively loaning the $100 to the Hotel Keeper (we shall consider his ability to trial the room before being bound by his rental agreement to be his interest payment), the Guest introduced enough liquid asset to the ring that the debts could settle each individually and serially rather than as a whole. That is to say, the whole of debts could be per agreement of all parties dismissed because and only because everyone in the ring owed the next and thus the matter settles completely if each member would accept as payment for one “neighbor’s” debt the other neighbor’s credit. The effect of the $100 bill is enabling the debts to each be settled by the persons who incurred them.
Cash excels where bartering cannot because one-to-one trading is highly situational and beyond two persons it only functions when something like this, a contrived closed circuit of equal-value debts, can be constructed.
This story is focusing on the wrong aspect of the economy it is trying to describe. Stimulation of economic activity is not a problem because activity is what resulted in these debts. The economy described suffers from a liquidity problem, that it needed an outside source of cash to settle. The critical component and moral of the story is that after the debts were settled, the $100 bill was removed from that economy. The United States is good at introducing $100 bills, but apparently poor at steps two and three: settle the debts, and remove the excess cash after it has served its purpose.