Well do you think wealth can really horded, isnt it true that if those rich people dont consume then the money supply grows, until somebody consumes. Which is how interest rates get so low in a recession, people stop consuming and the wealthy are made richer until somebody has the money and the desire to consume.
Interest rates get low during recessions by deliberate choice from central banks. They reduce interest rates directly to stimulate economic activity. This works because the cost of longer-term investment in growth is, largely, based on interest rates.
You’re slightly right that holding wealth increases money supply, but only indirectly, and only to a certain extent. Most importantly, the amount of money held in banks and investments isn’t affected much by market cycles—the amount saved changes dramatically, but that’s a small percentage of total wealth holdings, so it doesn’t matter much in the short term.
The bigger factor for increasing financial activity is something called monetary velocity, which is a measure of how many times the same dollar is spent per year. Like, you buy something from a store, they pay their employees with that dollar, the employee pays their rent, then the landlord… etc. Monetary velocity can change suddenly in a recession, so it has a far bigger impact.
If you’re interested in this, I’d suggest taking an introductory macroeconomics course. There are lots of free MOOC course options for this, but it’ll take 50-200 hours to complete one of them, likely, depending on your academic background and academic skills.
Well do you think wealth can really horded, isnt it true that if those rich people dont consume then the money supply grows, until somebody consumes. Which is how interest rates get so low in a recession, people stop consuming and the wealthy are made richer until somebody has the money and the desire to consume.
That’s not really how it works.
Interest rates get low during recessions by deliberate choice from central banks. They reduce interest rates directly to stimulate economic activity. This works because the cost of longer-term investment in growth is, largely, based on interest rates.
You’re slightly right that holding wealth increases money supply, but only indirectly, and only to a certain extent. Most importantly, the amount of money held in banks and investments isn’t affected much by market cycles—the amount saved changes dramatically, but that’s a small percentage of total wealth holdings, so it doesn’t matter much in the short term.
The bigger factor for increasing financial activity is something called monetary velocity, which is a measure of how many times the same dollar is spent per year. Like, you buy something from a store, they pay their employees with that dollar, the employee pays their rent, then the landlord… etc. Monetary velocity can change suddenly in a recession, so it has a far bigger impact.
If you’re interested in this, I’d suggest taking an introductory macroeconomics course. There are lots of free MOOC course options for this, but it’ll take 50-200 hours to complete one of them, likely, depending on your academic background and academic skills.