How can a recession see a drop in profits and a rise in poverty? Where does all the money go, if not to the businesses or people?

Question

How can a recession see a drop in profits and a rise in poverty? Where does all the money go, if not to the businesses or people?

In: 6

Answer 1

>Where does all the money go, if not to the businesses or people?

It doesn’t go.

If you have a loan and pay it off, the money is gone. The bank doesn’t really get the money, they’re all run by fractional reserve, so it means they could loan out more, but that’s only of people take out a loan. If there’s a recession less people are going to take on debt, which means literally less money flowing about in the system.

The idea of there only being X number of coins minted meaning “the money has to be somewhere” hasn’t been a real thing since banking became common and dominant. Even before money became fiat.