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Save or spend? Key issues are how much, how soon
In the Jan. 26 issue of New Yorker Magazine, James Surowiecki wrote this about a tax rebate as a stimulus package: “Skeptics on both sides worry that most people will save the rebate rather than spend it.”
Surowiecki is right about one thing. Skeptics do worry about it. In fact, virtually, everyone seems to worry about it. However, Mr. Surowiecki, the skeptics and virtually everyone are dead wrong, when they believe a successful stimulus must encourage people to spend money rather than saving it.
What happens when you spend the stimulus money you receive? You transfer it from your bank to the banks of the various stores at which you shop. That’s called “spending.”
These stores, in turn, spend the money you gave them by transferring it to other suppliers’ banks and to employees’ banks. Spending merely is what Sen. John McCain and Gov. Sarah Palin famously called “spreading the wealth.” Money never stands still.
Now consider what happens when you don’t spend the money. Instead, you put it in your bank savings account. Your bank immediately lends it or invests it. (It doesn’t store it away in a musty vault).
If your bank lends the money, it transfers it to the borrower’s bank, which lends or invests it. If your bank invests the money, it transfers it to the investment’s bank, which again, lends or invests it.
In short, it makes no difference whatsoever what you do with the money the government gives you, either by tax cuts or by rebates. All the money goes to banks that move it to other banks endlessly. From a stimulus standpoint, saving and spending are identical.
The key questions for saving this economy have nothing to do with where the money goes first. The key questions are: “How much?” and “How soon?” There are no other questions.
I’ll let you in on a secret. The answers are: “About $2.4 trillion per year” and “Now.” But that is for another discussion.
Rodger Malcolm Mitchell
Wilmette, Ill.
Euphemisms don’t change reality of war
It would be amusing – if it wasn’t such a serious, eye-opening matter – that President Obama’s press secretary refrains from calling our country’s conflict with Islamofacists a war – or call it anything else, apparently.
Denying obvious reality is not change any serious adult should believe in.
Mark Kalinowski
New York, N.Y.