Originally Posted by
Zeus
In economics you will read of the multiplier effect.
If I earn £10 I will probably save 10% i.e. £1 and spend the remaining £9.
The people I spend the £9 will probably save 10% =90p and spend the remaining £8.90
The people they spend their £8.90 with will save 10% i.e 89p and spend the remaining £8.01
etc etc etc the amount earned multiplies.
The same applies in reverse.
If the Treasury allow companies to go bust due to short term shortfalls the effect will be much more than the amount saved by not loaning companies the necessary funds.
In the long term the whole economy goes down the drain.
Ah, the 'trickle down effect' beloved darling of Thatcher and Reagan. It never really worked as intended. Large amounts of money were not spent and the wealth gap widened.