Friday, December 3, 2010

To Whom Do The Benefits Accrue?

In economics, an important question that is asked in economic analysis is: "To whom does the benefits accrue?" After making that determination, a value judgement typically yields a policy formulation. In the current state of economic affairs, we find ourselves saving more thereby spending less on consumer goods, paying down debts, etc. If there is any wonder why we're still in the "pain zone" so to speak, its because we're in a transition space with implications of structural realignment. But take a look at one aspect of the benefit accrual analysis: saving more means more money in bank accounts for banks to lend & lending is historically low, spending less on consumer goods is keeping jobs at bay as businesses still have untapped capacity and so lack an incentive to hire, households are paying down their debts and in doing so forgo opportunities to make consumer purchases that further complicate the situation. So, with more money in the bank & consumers paying down debts, this begets the following question(s): To whom does the benefits accrue? What is that money doing in the bank? Where does this money that is paying down debt going to? Who is benefiting from all of this?

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