- Feb 8, 2009
- Reaction score
Not true, unless the government is rapidly printing money - which ours is not. Spent money has a multiplier effect, which fuels most of our economy. Money taken out of the system represents a loss of aggregate demand. Granted, the corporations are not keeping their money in shoe boxes, and there is a multiplier effect from even very conservative investments, but it can't match capital investment and expenditures. It especially can't match using that money for new hiring, which is what our economy needs the most right now.
Of course, I don't blame the corporations for holding onto cash reserves. Demand is down, and those left in the work force have improved productivity, new hiring is not justified. That is where the government should be stepping in to solve this collective action problem and stimulate demand. Government can't, however, because half of the country has made the ideological decision that government cannot be allowed to intervene in the economy in any meaningful way. So here we languish.
My point here was a little less systemic and more literal. If I have a billion dollars in a box and refuse to spend any of it, I'll starve to death, the same as someone with no money at all. You have to spend money for it to have any value; otherwise, it is meaningless paper.