What is Happening With the Money When the Economy is Slowing Down?
There’s something I have been thinking about lately. Now that the global economy is holding its breath due to the coronavirus. When so many companies are losing money worldwide. And people are losing their jobs. What is happening with the money when the economy is slowing down?
According to John Maynard Keynes “ General Theory “, the demand of the consumers is key to prevent an economic recession. In order to keep the economy going, we need to spend money. Money has to be in motion.
I will give you a scenario: Company A makes money when Person 1 goes into their store and spend your money. You are able to spend money because you get a salary from Company B. And Company B makes money because your Person 2 spends money on their products. Person 2receives his salary from Company A.
So what happens when the economy is slowing down?
Person 2 does not receive a salary from Company A, this means he can’t shop at Company B. Company B runs out of business and can’t pay a salary to Person 1. Person 1 does not have any money to spend on Company A anymore.
When the economy is slowing down it is not like money will evaporate. We will still have the same amount of money. But the money will circulate at a slower rate.
But where does the money go when Company 1 and Company 2 are going bankrupt. and Person 1 and Person 2 are getting poor?
Are the Rich Getting Richer?
It is easy to say that “the rich are getting richer”. However, how do rich people get rich? When the stock market is falling and people don’t spend money, the money isn’t transferred to the rich people either?
So, what happens to the money when the economy is slowing down?
If you are looking for answers to the question “what happens to the money when the economy is slowing down”, you won’t find it here in the article. At least not in the main text. But I hope perhaps that some good ideas can be found in the comment section below.
Originally published at https://10yeartarget.com on March 30, 2020.