If it is happening to you, it is a recession
If it is happening to me it is a depression
Thanks for the correction - looks like I'm going to have to pull out my accounting book to ensure the correct usage of terms. I'll do my best to be more careful.
One of the assumptions I made was that money in the bank is like money buried in a field. Which is nonsense . . .
Of course it's nonsense. It's an extremely liquid asset. It can be easily withdrawn and spent!
Again, I'm not advocating purposeless hoarding. I agree that stopping all spending just to hoard it without any purpose is silly. I would never advocate piling up money just for the sake of piling up money.
When I save (be it actual cash or through a bank), I generally do so for a purpose: There is something I want to eventually spend it on. It can be a computer component, it can be retirement, it can even be an unforeseen emergency. Yes, I do eventually spend most of the money I save.
One of the nice things about a bank account is that the money isn't siphoned off somewhere else from your point of view, and it won't present you with the danger of a debt spiral as long as you maintain a positive balance. Overall, it's a lot less stressful than maintaining debt.
But the "crisis" results from people being unable to go into debt(and then spend).
Exactly: When you go far enough into debt, you lose your ability to spend!! That's pretty contradictory to your objective of keeping the money flowing and keeping people spending.
I want to keep money moving just as much as you do - and going into debt will not accomplish that. Going into debt is not equivalent to spending more.
Having a debt simply says you might
perform the second half of a transaction in the future. The cash hasn't flowed yet, but might flow in the future.
Problem is, the cash part of the transaction is becoming more unreliable. The money isn't actually flowing in all cases, because the creditors are demanding that the money flow faster than people can sustain.
Cash and bank accounts are extremely liquid assets, and can be used more effectively for performing transactions than debt can. You just have to be patient enough for it to collect the money before you spend it. You're still forced to maintain a sustainable cash flow rate, but without the much higher stress of debt.
Sure, you don't get the instant gratification - but frankly, it's the instant gratification that is causing people stress, because people are attempting to maintain more expenses than they have income. Money isn't magic - you can't sustain larger expenses forever!
Debt does not increase cash flow. It simply delays transactions and allows unsustainable expense rates for the individual.
What exactly do you think those creditors do with the money?
They give me pieces of plastic that cause millions of people stress, they give me frequent flier miles I'll never spend, they pay their employees, and a few other things.
One thing is for sure: They don't make great games like Galactic Civilizations.
The whole point is that I prefer to control where my money goes, and if I'm siphoning off money to a creditor, it's not going where I want it to go.
Again, I'm not advocating hoarding. I'm simply saying that the entire transaction should take place immediately using cash on hand or an available bank account.
In addition, what do you think my bank does with the money? Do you think that compound interest is magical and creates itself? Nope. Even though you don't see it, the money is actually being used by the bank. The loan somebody else takes out for a car or house is paying that interest in my account.
But that is all money is in the first place: it's just an IOU that can't be redeemed for anything.
It can be redeemed for goods and services
In fact, you should be informed that banks are required, by law, to save some cash. That's what FDIC insurance is all about. The economy can fall to pieces and you can still withdraw money from your bank up to the insured amount with zero fear of losing it. Interestingly enough, this has been in place for a long time and hasn't killed our economy.
In conclusion: You can use cash or a bank account for spending, just as you can a credit card. It's not any different, except the credit card leads to a lot more stress.
In fact, my bank offers a "check card," and I can use it just like a credit card. It has all of the benefits of being able to spend my money instantly, but without any of the stress of remaining in debt. I am absolutely no less liquid with my bank account than I am with my credit card.
"This planet has -- or rather had -- a problem, which was this: most of the people living on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper, which is odd because on the whole it wasn't the small green pieces of paper that were unhappy." --Douglass Adams