Where does all money and wealth go in the recession?
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Where does the speed go when you take your foot off the gas of your car, or when you stop pedaling a bicycle? If you learn literally nothing else about economics, understand this fundamental truth: **ECONOMIES ARE RECIPROCAL**. My expenses are someone else’s income, and someone else’s income comes out of my expenses. So, fundamentally, a recession is just the natural outcome of a lot of people losing income, and therefore cutting back on spending, at the same time.
The profits a huge corporation makes from launching a successful product don’t just get thrown into a hole in the ground, they’re re-invested into other money-making ventures, and those ventures go on to employ other people, consume resources, put products on shelves, and try, in turn, to earn profits, so the cycle can renew itself.
So, when there’s a large economic disruption, like, say, a housing bubble that suddenly bursts, or a worldwide pandemic which disrupts manufacturing and supply chains, or sharp rises in tariffs throttling international trade, that cycle is disrupted. Businesses earn less profit, that comes out of new money invested into new ventures, research, development, advertising, construction of facilities, you name it. And those decisions, in turn, have knock on effects.
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