Where’s the money going during recessions?

Question

It vice versa where’s it coming from when the economy is booming?

When the economy is bad, it feels like there’s not enough money to go around, but when it’s good there’s plenty.

In: Economics

Answer 1

Saving, safer investments that don’t return as much.

Basically money is created by carefully loaning out money. People collectively deposit $100 into a bank and that bank can lend $110 to businesses or home buyers or whoever. They use that money, including the $10 extra dollars that didn’t exist before, to do productive things.

Although this sounds (and can be) precarious, it’s a really underrated aspect of the US economy. We’re able to grow because _relative_ to other places we’re eager for risk and reward without overdoing it.