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General Talk / Re: Real World Economics
« on: September 15, 2011, 07:33:53 AM »
The more money you put in the bank, the more money the bank will be able to lend out, the lower their interest rates will be, which will help both businesses and consumers, and therefore consumption will be increased.
...Yeah... Which is why we had the Great Depression. Money had been packed away as savings in banks. Less aggregate expenditure into the economy lead to income decline and massive unemployment. To make matters worse, firms rolled out massive amount of output for which there just wasn't the demand. As the times became tougher, people started hoarding even more, worsening the cycle.
You didn't read what i posted last. A majority of Firms are not dependent on borrowed money- they get their funds from retained earnings, earning which they made because some consumers bought their goods. Money spent by one is the income of another- Its a circular cycle, and if you cut out one step in the process, you are undoubtedly going to impact the entire cycle.
You are saying that consumers buy products with the objective in mind that this will allow companies to invest.
Rubbish. I was merely stating what i stated in my earlier point- by consuming goods, the consumer is increasing the earnings of the firm, which will allow the firm to invest.