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In many cases there is no recipient of the money because we're talking about the bottom 80% in terms of wealth who typically just end up leaving the money in so

In many cases there is no recipient of the money because we're talking about the bottom 80% in terms of wealth who typically just end up leaving the money in some form of savings account or paying down some debt. That is probably a wise decision for that individual, but it's not going to boost the economy. Your obvious example may be obvious to you, but it is not a typical example of savings decisions. That was my point: You have to distinguish clearly between savings decisions and investment decisions. Also, typical cases and averages are what matters when you look at the macroeconomy, and that's what you were talking about in your first comment to which I replied.

AnthonyMouse 13y ago
> In many cases there is no recipient of the money because we're talking about the bottom 80% in terms of wealth who typically just end up leaving the money in some form of savings account or paying down some debt. How do you mean there is no recipient? In that case the recipient is the lender or the bank, which allows them to lend the money to someone else. You might also be surprised how good for the economy paying down debts can be in the long term. The person who paid the debt is not paying interest on it anymore, and has now improved their credit worthiness, which reduces the interest they pay on all of their remaining debts. The interest not paid can be spent or used to pay further debts (virtuous cycle). Or in the future the borrower can leverage the increased credit worthiness into more borrowing at lower monthly payments, allowing increased future spending. This is really one of those situations where politics and reality collide. Having the middle class pay down their debts is great for the economy in the long-term. But it may not do anything much today, which is what politicians care about when they're running to reelection. Hence we have a bunch of backward-facing policies that prioritize spending over saving when they are both important to economic growth and the choices between one and the other would be more efficiently made by the people.
- nhaehnle 13y ago
  When you pay down bank debt, the money just disappears, hence no recipient. Similarly, if you save money at your bank, your bank doesn't actually get more money. At best, you're shifting it from a checking account to a savings account.

AnthonyMouse 13y ago

> In many cases there is no recipient of the money because we're talking about the bottom 80% in terms of wealth who typically just end up leaving the money in some form of savings account or paying down some debt. How do you mean there is no recipient? In that case the recipient is the lender or the bank, which allows them to lend the money to someone else. You might also be surprised how good for the economy paying down debts can be in the long term. The person who paid the debt is not paying interest on it anymore, and has now improved their credit worthiness, which reduces the interest they pay on all of their remaining debts. The interest not paid can be spent or used to pay further debts (virtuous cycle). Or in the future the borrower can leverage the increased credit worthiness into more borrowing at lower monthly payments, allowing increased future spending. This is really one of those situations where politics and reality collide. Having the middle class pay down their debts is great for the economy in the long-term. But it may not do anything much today, which is what politicians care about when they're running to reelection. Hence we have a bunch of backward-facing policies that prioritize spending over saving when they are both important to economic growth and the choices between one and the other would be more efficiently made by the people.

nhaehnle 13y ago
When you pay down bank debt, the money just disappears, hence no recipient. Similarly, if you save money at your bank, your bank doesn't actually get more money. At best, you're shifting it from a checking account to a savings account.