The Economy

You have to understand is that the economy is not money. No amount of money in the hands of any amount of people is an economy. The economy happens when the money moves, when it is exchanged for goods and services. An economy happens when you pay wages, buy groceries, remodel a building, etc. An economy is the movement of money.

Now, money in an economy has a natural flow. For lack of a better term we’ll call it “upwards”. If you put money in the hands of the common man they will spend it. They’ll buy necessities, they’ll buy entertainment. They might save some, put it in a shoe box under the bed or in a bank, but mostly they’ll spend it. And one way to picture it is that every time money is spent, exchanged, a little bit of it is shaved off and moves “upward”. Slowly, bit by bit, money moves toward the top, toward the business owners and the wealthy. The reason is, as stated just a few sentences ago, most people spend their money. Wealthy people, however, have more money than they “need” to spend. Ultra-wealthy people have more money than they “want” to spend.

So the money tends to pool at the top. Unless you can convince those people with the most money to spend it, to “invest” it, to put that money into motion, that’s where the money will stay. That’s where the money “exits the economy”. Some people will tell you that the wealthy already do invest, but it isn’t just the act of investing that is important, it’s how deeply that money goes. If they put money in the stock market, then very very little, if any, of that will make it’s way down to the bottom. It’s just sort of churns, money making money, and cycles back to them, or vanishes. It touches very few people. But if you can get them to invest in capital, in businesses directly, into ventures that employ people and sell goods and/or services, then that money goes deeper. It gets into the hands of people who then buy things and the money spends around through the economy, changing hands thousands and thousands of times before it gets back to the investor bit by bit.

You can’t stimulate the economy by giving money to wealthy people unless those people are committed to starting new businesses and hiring people and buying a lot of goods and services and churning that money into the economy. If they just use the money to buy stock, or buy back stock, then it doesn’t help.

You can stimulate the economy by giving money to poor people, because they will spend every dime of it and fuel the engine of the economy.

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