A monetary story
Let’s do an experiment. First we’ll hand out bundles of 500 one hundred dollar bills to wealthy couples who own expensive homes and drive expensive cars. We’ll do this until a billion dollars is spent. 20,000 wealthy couples will have been given fifty grand as gifts – gratis.
Next we’ll do it all again but this time we’ll target a different class of people.
This time we’ll visit any area that has been hardest hit by poverty, unemployment, off-shoring of jobs, etc. We’ll search out mothers and or fathers with a child or two in tow. If they live near the poverty level we’ll hand them $1,000 without a blink. One billion dollars gifted out in $1,000 increments. A million recipients.
Six months pass. We call a random 100 of the wealthy couples. We ask them how much, if any, of the money is remaining. We find out that in nearly every case, the money had been invested in some brokerage or investment account. They’d taken the gift and saved it.
We next called 1000 of the poor families that we’d given $1,000. Again we ask how much, if any, of the original gift remained. We find that rarely was any of the money was left; they’d spent every cent.
In this experiment two billion dollars was injected into the economy. The first billion, that gifted to the rich, was effectively lost, sequestered into bank or investment accounts. That first billion vanished from the economy. Eventually it might return, but for now, gone.
The second billion drove the economy. For the most part every dollar gifted to the poor was returned to the economy by immediately being spent. That billion dollars began to circulate as soon as we walked away from handing it out. Wherever it was spent it invigorated the local economy. That billion dollars had a direct and immediate impact on the economic health of the nation.
Now a rationalization. To the first part we’ll switch out the gifts to the wealthy and replace them with tax breaks, loopholes that are given to the wealthy. To the second let’s just call it what it really is – it’s welfare.
Lesson learned? To stimulate the nation’s economy, to drive the velocity of money to increase the liquidity of commerce should we hand gobs of cash to the rich or support the working, struggling poor??