Is increased spending the cause or the effect of prosperity?
Is increased spending the cause or the effect of prosperity?
So many people keep saying the key to recovery is to persuade people to just spend more money.
Of course, the main obstacle is, people have a lot less to spend because of the economy. I’d love to spend more if I could. D’ya think?
I say, spending is the result of prosperity, not the cause of it.
But the statisticians will say, statistics show spending increases during times of prosperity, therefore the spending caused the prosperity. Is this a valid statement?
Best answer:
Answer by SDD
Spending itself does nothing to cause prosperity. It depends on what you spend. I can spend to dig a hole and fill it up. If it is something that adds value, then you will have added to prosperity. Prosperity does allow you more to spend in the first place, though.
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Spending does help a system’s economy since it brings about an influx of liquid assets into the circulation of cash. In most cases or in ideal cases perhaps, more money in circulation should mean a decrease in the general price of goods (since the “supply” or your money should grow greater than the demand) and a bullish market.
With regards to prosperity, I think PROPER and wise expenditure of cash will be the key to prosperity – a proper balance between spending, selling, saving, and investing among others. Then again, that’s just my two cents. I hope it helps.
Prosperity comes from the creation of wealth. Wealth is only created by production. You cannot spend your way to prosperity. The reason the US is currently in such bad economic shape is because Keynesians tried to convince people otherwise. They told us we could get something for nothing it we bit the bait, hook, line, and sinker. The US – individuals, corporations, government, etc. – have been spending more than we’ve been producing for a long time. It’s been a fun party, but now it’s time to pay the bills. However, taxation and regulation have chased most of our production overseas and we aren’t producing enough to pay the bills and interest. To make matters worse, we were also sold the idea that inflation is good and that fractional reserve banking isn’t fraud. We’re in sad shape, but have no one to blame but ourselves.
“Democracy is the political theory that the common man knows what he wants and deserves to get it … good and hard.” H.L. Mencken
Spending does definitely contribute to prosperity , since if there is no inflow of money, there wouldn’t be an outflow either. And if there is no outflow of income, the economy can not grow since there will be a stagnation.
Thus as you put it spending is both the input and outcome of prosperity. But I must say, good Question :)
Answer mine ————
http://answers.yahoo.com/question/index;_ylt=AoU6zEy50dlSJzVyEllokK8azKIX;_ylv=3?qid=20090901084452AAvQ6Kv
It’s not that spending leads to prosperity. It’s that spending up to the point that economy can provide the output for will lead to prosperity. Contrast that to a situation where the economy has the ability produce more, but a lack of spending leaves that ability untapped. That is a loss of potential prosperity.