Is spending good for the economy?

Discussion in 'Other Discussions' started by ysabel, Mar 19, 2009.

  1. ysabel

    ysabel /ˈɪzəˌbɛl/ pink 5

    That's the main rationale for the stimulus package, isn't it? To boost consumer spending. Maybe even create jobs.

    In times of personal financial crisis, I suppose spending just makes your problems worse...but still, is that good for the economy?

    What about if you're wealthy? You go on a frivolous spending binge. After all, you can afford it. Does this help the economy? If yes, then why do some people think it's a bad idea for the rich to spend so much money especially when economy is bad for everyone? Isn't it the best time to have this spending behavior?

  2. ILOVEUSA911

    ILOVEUSA911 Registered Member

    Spending is definitely good for the economy. Unfortunately, unless you are rich, with the economy such as it is and the rate of unemployment so high, blue collar workers are for the most part making it from paycheck to paycheck. So spending on anything that isn't a necessity is difficult.

    Yes, it does trickle down when the rich go on spending binges. However, with the losses in the market, the banking debacle, coupled with the fact that President Obama has imposed higher taxes on the rich, they may even be tightening their belts, because the future is so uncertain. Rich people usually have a lot of their money tied up in investments. So they could be having a "wait and see what happens" attitude before any type of spending binges.

    If I could get some stimulus money, I promise I would spend, spend, spend. I love to shop!:D
  3. icegoat63

    icegoat63 Son of Liberty V.I.P. Lifetime

    Thats a good question and I have to laugh. The way I've always understood it and I could be wrong here so if someone is more inclined to a more accurate answer I hope this will provoke them to do so.

    But when it comes to Spending the funny thing is the Government doesn't really care if you're spending it at Macy's or Barnes & Noble. What they want is you to put the money in the bank and have the Bank spend the money on the Stock Market. Because that's where the real spending happens. The money that's exchanged just between the banks alone is substantial and the cut that the government gets from it via interest rates and other means are way more than what Jane Dough could spend on a $5,000 shopping mall rampage. Agreeably money has to exchange hands on the lower level (us citizens) for the banks to even have the confidence enough to even play the stock market. But yeah, the bulk of the spending the way I understand it works in a nutshell like this via all the Econ and Accounting classes I've taken;

    The People: Spend their money to build the banks confidence in certain corporations or other ventures with stock availability. They are also the ones that invest their money in the banks.

    The Banks: Take the peoples invested money and use it on the stock market in Federally Protected method to make More money with our money. This in turn sparks the economy to move faster when confidence is at its highest.

    The Government: Gets its cut via loans to the banks so that they have the money to loan to the people that the people pay back to the bank that the bank either pays back to the Gov't or puts into the stock rotation.

    Now having taken all that into consideration, I still have no friggin clue which one needs to lead the other :hah:
  4. Mirage

    Mirage Administrator Staff Member V.I.P.

    I don't see how it can be good.

    Is spending good for a family in debt? Is spending good for a business that is going under? No....... Cutting back and making wise financial decisions according to a budget is best.

    So why would it be any different with a government?

    Um... we do have to pay this back, so we'll spend a few trillion now and guess what? Yep, we still have to pay it back....

    This is the exact same type of thinking that got us into this mess.

    Take the housing crisis for example. Is it really a crisis or an epidemic? A crisis would imply an unstable condition. An epidemic is the rapid spread of something. I'd say the mentality of "spend more than you can afford" is spreading like an epidemic. It's why so many people bought houses they can no longer pay for and it's why our own government is taking out loans when it can't even pay for trillions of dollars in previous loans.
    Last edited: Mar 19, 2009
  5. Iris

    Iris rainbow 11!

    Not everyone is in debt, Hybrix. Also, he is spending money so that in the long run it will help the economy. Whenever I go shopping (even if it is something I need) I joke that I am going to go stimulate the economy lol
  6. Mirage

    Mirage Administrator Staff Member V.I.P.

    Well you actually would be stimulating the economy. :lol:

    As for not everyone being in debt. I'm talking about the USA being in debt. It's pretty astronomical.
  7. ysabel

    ysabel /ˈɪzəˌbɛl/ pink 5

    I forgot about this thread until Hybrix brought up the good side of the countess getting thousands in weekly pension for her lifestyle. She's going to spend the money to stimulate economy! :)

    I read something about how saving might be more helpful than spending in terms of moving the economy. That is if you put it in the banks. But then another article caught my attention. Here's an excerpt:

    Stop Saving Now!
    Daniel Gross

    NEWSWEEK, issue dated Mar 23, 2009

    Might this be the objective of the call to spend?
  8. Mirage

    Mirage Administrator Staff Member V.I.P.

    Here's how I see it.

    Spending is good for the economy.

    Spending is bad for your own personal finances.

    Basically the government is asking people to NOT save, which is poor planning for the future. What happens if these people lose their job later and have no emergency money set aside?

    I say let the economy fix itself. Let companies that fail.. fail, and don't give money to people simply for the sake of having them spend it. It's like picking a scab. It might seem healed for a while but it will continue to scab over until you let the healing process take place.
  9. Iris

    Iris rainbow 11!

    Well, I am sure there is a balance that can be made.
  10. MenInTights

    MenInTights not a plastic bag

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