Blog: Path of my Life
by Karlin

Economics 101 - Money Must Flow

Wealthy people and corporations are sitting on the money, and that is why money is not circulating, hence "recession".

Date:   8/8/2011 3:44:34 PM   ( 11 y ) ... viewed 41448 times

----- Part 1:

As with energy, wealth is difficult to store, especially for long periods of time. You hold currency, it can be devalued; You hold gold and the price can come down; Your buildings and equipment need constant maintenance which has to be paid for with revenue the buildings and equipment provide.

Hoarding anything upsets the balance and flow that is a hallmark of life on earth. Everything cycles, everything circulates, or it rots [one way or another]. An economic recession is basically just "stagnation".

Corporations and wealthy individuals are sitting on all the money. They have record amounts of "liquid capital", and they are not investing it because conditions are not right. There are 100s of major corporations who are holding amounts around $30 Billion to $100 Billion in cash today, whereas, in more normal times, corporations would be spending any profits on expanding their operations.

The wealthy, using their wealth to influence government policies to do whatever the wealthy decides is best for themselves, have created a situation of stagnation - they fought hard to get all the money and now that they have it they are sitting on it because conditions are not good for investments right now simply because money is not circulating - these are the conditions the wealthy and corporations actually arranged for!!

If they continue to sit on the wealth, the wealth will dwindle away to nothing. The US currency could be devalued - a much bigger problem that lowered credit ratings!!

-----Part 2:

Has government tried everything to get the economy moving again? They saved some banks and other financial industry entities, they saved some major corporations [automakers], but the one thing that governments have NOT tried is to stimulate the economy BY GIVING STIMULUS MONEY TO THE POOR AND MIDDLE CLASS PEOPLE. The poor would spend it right away, which is what is needed.

It would be too bad to see the economy go down without trying these two simple ideas that directly address the problem:
1] get that money flowing again by taxing corporations and wealthy people on any savings they sit on for more than one year [at a rate of around 35%]
2] as governments collect that money, they hand it over to poor people to spend.
[or, if the wealthy/corporations invest it, there will be more jobs and therefore more consumer spending]

----- etc:

This is just a suggestion from someone who knows very little. Knowing very little can help put things in perspective, whereas experts are bogged down in their own language and ideas. The Big Picture is more visible to those who are on the outside.

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