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"hold on to extra cash" is intuitive but it is not how our economy works. Anyone saving money has that money circulated into the economy, through stocks, bonds

"hold on to extra cash" is intuitive but it is not how our economy works. Anyone saving money has that money circulated into the economy, through stocks, bonds, or bank lending. In fact, it is the wealthy who have the surplus capital available to invest in ventures like those you mention. It is extremely stimulative.

earl 15y ago
Nostromo specifically said, " not very stimulative. More money would be returned to high income individuals who are more likely to hold onto the extra cash." Which is exactly correct -- poor people spend basically every penny they get because they're forced to, while wealthier people will either pay down debt or save. Thus for a fixed stimulus, your best bang for the buck is income supports for unemployed / poor because they will immediately spend it. Note also a big portion of our current economic climate is a lack of demand. Try reading a couple months of Paul Krugman -- he explains this particularly well.
- gaius 15y ago
  Krugman is a buffoon, his solution to every problem is " print more money".
nostromo 15y ago
I guess we should define "stimulative." I was talking about it in a job-creation sense. Yes, wealthy individuals will put the money into stocks, bonds, or bank accounts - not under the mattress. But public companies' market cap rising a bit has a much less direct effect on jobs than creation of demand for local goods and services. Putting extra cash in a bank account is even worse -- a much simpler way of getting banks to lend is to reduce the prime rate, not to increase the savings rate.
- derrickpetzold 15y ago
  Oh my I'm afraid your understanding of economics is very poor. Infrastructure funding can only come from tax money. Tax money can only come from the private sector. The private sector makes by money by using capital (savings). That is how it works. That is why savings are good and taxes are bad.
  - Steko 15y ago
    If his understanding of economics is poor, yours is even worse. All he saying is you get a better multiplier by giving it to people who will spend the money first on goods and services then on people who will put it directly into savings. And he's right, which should be obvious.
    - derrickpetzold 15y ago
      That is not true. That is redistribution wealth. You are taking the money away from the people are are making and giving to the people that are spending it. That makes no sense. Savings is what drives the economy. Without savings there would be no capital. omg. Please tell me where this multiplier comes from? If money was multiplied through taxes the USSR would still be around and booming as they had an effective tax rate of 100%. So do tell please.

earl 15y ago

Nostromo specifically said, " not very stimulative. More money would be returned to high income individuals who are more likely to hold onto the extra cash." Which is exactly correct -- poor people spend basically every penny they get because they're forced to, while wealthier people will either pay down debt or save. Thus for a fixed stimulus, your best bang for the buck is income supports for unemployed / poor because they will immediately spend it. Note also a big portion of our current economic climate is a lack of demand. Try reading a couple months of Paul Krugman -- he explains this particularly well.

gaius 15y ago
Krugman is a buffoon, his solution to every problem is " print more money".

nostromo 15y ago

I guess we should define "stimulative." I was talking about it in a job-creation sense. Yes, wealthy individuals will put the money into stocks, bonds, or bank accounts - not under the mattress. But public companies' market cap rising a bit has a much less direct effect on jobs than creation of demand for local goods and services. Putting extra cash in a bank account is even worse -- a much simpler way of getting banks to lend is to reduce the prime rate, not to increase the savings rate.

derrickpetzold 15y ago
Oh my I'm afraid your understanding of economics is very poor. Infrastructure funding can only come from tax money. Tax money can only come from the private sector. The private sector makes by money by using capital (savings). That is how it works. That is why savings are good and taxes are bad.
- Steko 15y ago
  If his understanding of economics is poor, yours is even worse. All he saying is you get a better multiplier by giving it to people who will spend the money first on goods and services then on people who will put it directly into savings. And he's right, which should be obvious.
  - derrickpetzold 15y ago
    That is not true. That is redistribution wealth. You are taking the money away from the people are are making and giving to the people that are spending it. That makes no sense. Savings is what drives the economy. Without savings there would be no capital. omg. Please tell me where this multiplier comes from? If money was multiplied through taxes the USSR would still be around and booming as they had an effective tax rate of 100%. So do tell please.