When people spend money, someone is effected. If you spend one dollar or one million, spending of money creates cash flow, cash flow creates jobs. The economy is driven by the exchange of goods and services and the movement of money. Even money is a product, when credit is too expensive in the form of higher rates and fees, consumer spending is limited, especially for larger purchases. The current credit crisis is an example of this. When consumer choices are are limited because credit isn’t available for larger purchases it can have a devastating effect on all types of businesses connected to those products. When business succeeds we all benefit. A particular business may need a supplier or shipper, printing company or any number of other business services. All those businesses benefit, as well as their employees and the local economy where that business is located. An example of this is a company with 250 or 500 or any number of employees in Anytown USA. When those employees go to lunch, buy gas for their car, shop at local stores near work etc. it has a positive impact on the local economy. Spending money is extremely important to driving the economy, this is why every news station in the country reports on year end holiday sales figures. Because it effects every business that manufactures, ships, sells, repairs, cleans, installs, or advertises those products. If businesses don’t make enough profit, they lay off workers, less workers means less money being spent and in turn more jobs being lost. Many different types of businesses rely on each other for survival. Let’s say a very large company does business with several hundred other businesses, like Wal-Mart or General Motors. Now, think of all those employees and all of the various products and services they spend their money on. It can only do good things for the economy, however if any large portion of the money flow stops, well, big problems can occur, just like the problems our economy is facing now.
Now let’s take a look at the wealthy and their effect on trickle down. If a person, rich or poor or anyone in between spends money, someone benefits, but let’s look at it from the top down. Some wealthy person owns their own business or multiple businesses and employs X number of people. Those employees pay taxes and spend money on all the necessary life expenses and someone else earns their income from that money. Also this rich guy may own a home or two or three, and when he buys a home or a car, money exchanges hands more taxes get paid and income earned and so on. What about maintenance on his house and cars? Painting, roofing, carpet cleaning and floor care, house keeping and for the cars auto mechanic, car wash, tires. The list goes on and on, so I really don’t think anyone should be upset when the rich get richer, because they are most likely to spend more of it and have a positive financial impact. All the companies that help maintain their possessions and those people that work for them receive a benefit and in turn employ others who also spend money and pay taxes. So, a wealthy person automatically redistributes wealth every time he spends money. The creation of wealth is the reason why most people have a job in the first place. Companies don’t start out of thin air, they are started and run by people, and if they are successful companies, someone might have become wealthy because of it. That wealth is spent and maybe that rich guy decides to start another company or allow someone else to start their own business and the cycle of trickle down starts all over again, so thank some rich guy for the fact that you even have a job. All of the places you spend your money, someone is making money and you are supporting a job and business. The economy runs well when we spend money, the more we spend the more everyone benefits. TRICKLE DOWN DOES TRICKLE DOWN. It is an economic fact, even if the rich get richer and poor get poorer, money still flows from the top to the bottom. If an area has businesses, it has employees who spend money on food, housing, transportation, entertainment and so many other things. So think about the benefits of big business improving income for many other smaller businesses nearby. Many businesses do business with each other and this improves the economic situation for everyone, so go spend some money.
I would be remiss if I didn’t take the time to thank you, my faithful readers for visiting our site and reading The Economy, Credit and Trickle Down Economics (The Ripple Effect) . I truly appreciate you!