Economics: What happen if every US citizen spent $5000 at the same time?

According to the dumbass Vice President, spending money is the only way to keep from going bankrupt. Using his retarded logic, we should all spend every damn penny we have.

China would be 1.5 trillion dollars richer.

This would be a one time demand shock that would serve only to massively increase prices and result in a large pecuniary transfer to suppliers.

I am assuming this happens by surprise somehow, so that suppliers don't have time to react, they are just confronted with lots of people wanting to spend money quickly. The market will realize that ravenous spending will threaten inventory if left unchecked, the check will be to raise prices. People will thus have to pay more for everything until the $5k is gone. Then things will go back to normal.

If this was planned somehow, it may result in some increased employment prior to the binge, but just how much depends, it probably wont be too much because all companies could really do is run factories longer, maybe some would build more factories, but a one time binge probably wouldnt justify the costs of building a new factory. So in this case, it would all depend on how much extra was produced in anticipation of this event, but likely not too much more could be produced so the main effect would be high prices.

Are you talking about spending $5,000 over 30 days total, or in addition to normal expenditures?

It would all depend if the economy was expecting this economic shock.

If it was expected, and people believed that it would happen and then spending would return to normal spending levels, it would be beneficial to the economy.

Well many people (especially poor people) can't make a move because they can never accumulate more than a few dollars at a time (due to bills, lack of a job, etc.).

So I was wondering what would happen if everyone was given $5000 when they graduated high school so that they could 'make a move'. So I guess it would happen annually if you limited it to high school graduation.

Variables would be:

1) Who could be given the money? Only high school graduates, all poor people, or everyone in the country.

2) Should the purchases be limited to school tuition or a car or what?

3) How much money should be given: $5k, $10k, $20k?

4) Where should the money come from? Maybe to prevent government spending, the government could make people/parents save money every month, but make it a little enough amount of money to not have a noticeable effect on spending and saving habits. It would not have to be a significant amount because the money would have 18 years to accumulate. Call it a 1% savings tax or something and neither the government nor the family has access to it.

oh

5) How long recipients can wait before spending the entire amount.

Walk Away Joe wrote:

According to the dumbass Vice President, spending money is the only way to keep from going bankrupt. Using his retarded logic, we should all spend every damn penny we have.

Yeah, we've never hear that before. GWB.

I know ZILCH about economics, but what if Bush's and Obama's stimulus plans were to give money to Americans to spend (hopefully on American made products) or even to get out of debt- instead of giving it to big business.

boo boo poo wrote:

Maybe to prevent government spending, the government could make people/parents save money every month, but make it a little enough amount of money to not have a noticeable effect on spending and saving habits. It would not have to be a significant amount because the money would have 18 years to accumulate. Call it a 1% savings tax or something and neither the government nor the family has access to it.

Responsible parents do this already. It's called a college fund. Parents that don't save for college expenses are either stupid or seriously can't afford to.

Under what premise should the government mandate personal savings? Yes, people should do it, but it's not the government's job to force people to do it. It would cost the government money to make sure people followed this law, thus contributing to the government spending you were trying to prevent.

"Responsible parents do this already. It's called a college fund. Parents that don't save for college expenses are either stupid or seriously can't afford to."

Yes, maybe true, but I think a famous policy-maker once said that "we should make policies based on how people ACTUALLY ARE, instead of how they SHOULD BE". If we want to increase our country's greatness and productivity, then we have to sometimes help those that don't help themselves. Some of them will learn and change their ways. Regardless, it could put less people in debt that had no business getting loans in the first place. That is just a burden for loan providers.

"Under what premise should the government mandate personal savings? Yes, people should do it, but it's not the government's job to force people to do it. It would cost the government money to make sure people followed this law, thus contributing to the government spending you were trying to prevent."

It's not the 'governments job' to do many things that it does, but it does it in the interest of our future (roads, education, etc).

It's the digital age. Computers can do all of the work if you program them right. Make certain purchases approved or not. Say you wanted to make it possible for the money to only be spent on college. Only the college financial aid officers could be approved to use this money. How exactly would this contribute to government spending?

6)How might a program like this be mixed into the current welfare and assistance programs? How might a system like this lessen the cost of the other systems?

Prices would surge for about 4 weeks, then slowly collapse.

Likely prices would fall harder than they rose, as people wouldn't be consuming, and normal consumption models would be broken and retailers and normal businesses would be confused.

Economystic wrote:

Prices would surge for about 4 weeks, then slowly collapse.

Likely prices would fall harder than they rose, as people wouldn't be consuming, and normal consumption models would be broken and retailers and normal businesses would be confused.

Kinda like what happens when a short-term tax credit expires. Artificial demand.

boo boo poo wrote:

What would happen if every us citizen spent a lot of money (say $5000) all at once ('at once'= in the span of a 30 days)? And they could afford it. No one is going into debt. It all came from savings over the years.

What bad or good would come of that for companies, spenders, and investers etc.? What would happen if you changed the amount of money and the time span?

1) This could NOT happen. If in your scenario everyone in the US could afford to spend $5,000 without going into debt, then we'd likely have an very affluent and privileged society. As it is, the VAST majority of American Citizens are in debt, and more specifically the vast majority have credit card debt even. Just not even a possibility.

2) IF there were magic in the world and this DID happen, it would greatly throw off company predictions for future sales, and items would be over produced and stocked so that after a bit of a run up on prices, they would eventually drop to bargain basement prices and likely not sell well because those items had already been sold.

Anyway, perhaps you should just get yourself into position (if you're not already) to be able to spend $5000 without thinking about it and then do that.

What would happen if everyone was given $8,000 for buying a house? What would happen if everyone was given $4,000 for buying a car?

Short-term demand would rise, long-term demand would stay the exact same. Tax dollars and productivity would be wasted.

runn wrote:

I know ZILCH about economics, but what if Bush's and Obama's stimulus plans were to give money to Americans to spend (hopefully on American made products) or even to get out of debt- instead of giving it to big business.

What you meant to say was "...give money BACK to Americans..." For some reason, everyone seems to think that this money is a gift to us. IT'S OUR MONEY IN THE FIRST PLACE.

runn wrote:

I know ZILCH about economics, but what if Bush's and Obama's stimulus plans were to give money to Americans to spend (hopefully on American made products) or even to get out of debt- instead of giving it to big business.

You also seem to know ZILCH about how the stimulus is being spent. Note: stimulus does not equal the TARP spending which was used to support financial instituions, etc. -- which has essentially been paid back.

The $317B stimulus bill (excluding the tax cuts) was primarily spent on improving infrastructure for highways, transit, education, energy, agriculture, military operations, and telecommunications. A portion was also spent on stabilizing state governments, paying for the 2010 census, and scientific research.

We have have done a horrendous job of maintaining and evolving our national infrastructure since 1980. The stimulus spending began to address those failings while also adressing(but not coming anywhere close)the decline in demand created by lowered consumer consumption.

I suppose we could have given each person in the country $1K instead(essentially what Bush did with tax credits in the past) but instead Obama spent it on infrastructure improvement. Which is better long-term?

Wendell Gee wrote:

Walk Away Joe wrote:

According to the dumbass Vice President, spending money is the only way to keep from going bankrupt. Using his retarded logic, we should all spend every damn penny we have.

Yeah, we've never hear that before. GWB.

Lol the typical "blame bush!" lib response

There is not enough cash to do that; it would have to be charged