austindefender

Criminal defense in Austin Texas.

Stimulate This

Posted By on January 28, 2009

“Skeptics,” writes James Surowiecki, of Obama’s stimulus plan, “worry that most people will save the rebate rather than spend it.”  Everybody seems to think if we put the money in the bank, it will be wasted. Strangely, they also all think we don’t save enough.

But what happens to money when it’s saved?  You might think it sits in a vault and gets moldy.  But that’s not how it works.

Money saved is money lent.  Banks don’t sit on your deposit, they lend it out to somebody else.  That’s the magic of banking – they take the same dollar, and make it appear in more than one place at a time.

And money lent is money spent.  (Why else would you borrow?)

It looks a little like this:

Yes, this post was an excuse to play with MS Paint.

So if your stimulus money is going to make its way into the economy, regardless of whether you spent or put it in the bank, why are people worried?


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