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To: Starwind
Repaying debt is spending, and I think you are confusing the velocity of money with the multiplier-effect.
37 posted on 08/20/2003 5:56:29 AM PDT by 1rudeboy
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To: 1rudeboy
Repaying debt is spending

No. Repaying debt is the compensation of prior spending of borrowed money. It is not additional spending.

I think you are confusing the velocity of money with the multiplier-effect.

No. The multiplier effect is the result of banks making multiple loans (assuming debtors step up) less the reserve req on each loan. But to make multiple loans, the money has to come back in multiple times. Each time it comes in, it is loaned out less the reserve. Each time a loan is made from the 'same' money supply (less a reserve) the velocity of money increases (assuming the loaned out money is spent on something) and the money supply 'multiplied'.

But the velocity of money can increase without multiplying when instead of saving, someone buys something with cash. But a cash purchase only increases the velocity, it does not increase the banks 'multiplier effect'.

They are related, but not the same.

39 posted on 08/20/2003 6:16:58 AM PDT by Starwind
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To: 1rudeboy
Repaying debt is spending

Anyone who pays off high interest debt is cutting the interest debt. Once you get all the interest paid, you will have more money to spend. We have no credit card debt and pay every credit card bill in full every month. The only interest we pay, is on our home mortgage.

42 posted on 08/20/2003 6:33:36 AM PDT by Arrowhead1952 (Clone Ann Coulter, the woman sent by God)
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