Posted by swamphawk22 on 5/15/2012 11:24:00 AM (view original):
Typical Econ theoretical discussion...the widget.
Lets say I produce light bulbs. I have cash, but that will lose value if I sit on it.
1 New marketing campaign...light bulbs are the new pet rock
2 New Product...The T-1000 series bulb is better than the T-101.
3 Salespeople pressure...1st place is a Cadillac, 2nd place is steak knives...
When the government comes along to save us all it stagnates the process.
So you provide light bulbs. Lets say your clients are hardware stores.
When a bunch of construction workers, mortgage brokers, real estate agents, and bankers lose their jobs, they have less income. Because they have less income, they spend less on everything. They stop fixing things around the house, building projects, working on hobbies, going camping, etc. Hardware stores (along with other businesses like restaurants, clothing stores, movie theaters) see a massive decline in sales. They lay off workers and close stores. Things get worse because now there are even more people out of work who don't have income to spend on stuff, including light bulbs.
Your special marketing and sales incentives may keep you afloat, but you certainly aren't going to grow, and you certainly can't pull the entire economy out of a recession. In fact, it would be irrational for you to take steps that would help the economy. Your sales are down, you aren't going to hire more employees. Your sales are down, you aren't going to invest capital in new machinery.
The stagnation is the contraction in the economy. Something has to jump start it or the downward spiral doesn't stop. Looking at the broad economic indicators, the stimulus did jump start the economy. Just not as much as we needed.