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

Well drops in profits and rises in poverty tend to correlate strongly, if there’s less money then people are poorer.

If I’m reading the question correctly, your premise is that there’s a set amount of money, and then either consumers/workers have the money or corporations are making the money with profits, which is totally false. There’s some good answers here about fractional reserve banking and economic cycles, but the question itself is flawed.