Economics 101

All the experts know that there is simply only one way to solve a recession/depression -- for people to spend money. It is a little counter-intuitive to those who don't understand the way economics work, but that is the simple truth.

What I don't understand is why the President or some of his top people don't do PSAs that state this. Maybe have Al Gore come on and do a send-up of his Oscar winning movie, An Inconvenient Truth, and show bar graphs and pie-charts that explain that when you spend money, it trickles through the economy and impacts, literally, hundreds of other people, jobs, and businesses.

For example, you go down to your local eatery of choice. You spend $50 for you and your honey to have a nice meal. That $50 and your presence at the restaurant causes the owner to have to hire and pay a server, a cook, a dishwasher/cleaner (each of whom then have money to spend on their own things). The owner also has to buy groceries from his distributor so he can make your meal, which then gives money to that distributor. Who then has to buy his goods from the manufacturers of the food products, which gives them money. And on each step of the way, each person or business who gets paid has to in turn spend more money on personnel to work the jobs and on other goods and services, all the way to the farmer who owned the cow and had to pay for water, grain, breeding, people to work the farm, etc.

Now, this system is slow. It provides for a strong foundation and is the most solid way to bring an economy out of a recession, but it is slow. Which is why so many countries in recessions go a faster route that works nearly the same way- war. War brings people into the military, and pays them to be there. It also pays for various businesses to make uniforms, guns, ammunition, bombs, electronics, food/rations, tires, oil, and everything else needed by the military to equip, train, and maintain those military people in the war. The same trickle down effect of the money pervading the country's economy works, but it works much faster than the first method.

This method of trickling money through an entire economy is so useful and successful that many charities have switched to this method of "donating" money to poor countries. Rather than just sending in experts to build something in a third-world country, they provide very small "micro loans" to an existing (or new) business owner. The act of that business owner building his business, hiring more people, buying his goods and services is more successful at raising the economy of the entire region than just giving the people food or sending in experts to build stuff for them. And, more importantly, it teaches them independence and the value of the money to them and their community.

This simple concept is foreign to so many, as they don't pay attention or do not take any sort of simple economics class. So, have our leadership or hire some high-profile actors to do PSAs to get this information out to the general public. By spending money you actually save the country and will, in the long-term, have more money to spend/save as you see fit.


Caveat: This message does not address the need for people to only spend within their means and to save for their future responsibly. These ideas would need their own PSAs and may be addressed in future blog posts by this author, as he sees fit or gets riled up about something.