solving the economic crisis, part 1

The current economic crisis began primarily a credit crisis. Lenders are unwilling or unable to lend because the perceived probable gain is not great enough to compensate the lender for his risk. The effect of this is that people and companies, used to buying on credit, cannot get the credit and therefore, do not buy. As you know, when people do not buy, the economy slows down. As the economy slows, there is less money flowing. As I understand it, you claimed that the crisis which started as a result of the sub-prime mortgage crisis in the US would not come to Canada because we have better bank regulation. But when the elephant sneezes, the mouse gets a cold and we have been affected. Our customers in the US do not buy from us either and the flow of money has nearly come to a halt.

In macroeconomic terms, one would say that the marginal propensity to consume is very low. Solutions to this are not simple but they should (were I not writing to you, I would have been more emphatic and used the word "must") include help to the poor and underprivileged.

Those who have the least spend the largest proportion of their money. Everything that they receive goes back into the economy. They spend their money locally for the basic goods and services that they need immediately, for food, for rent, for transportation, etc. Because they spend their money locally and to others who need the money desperately, most of the money gets reused immediately, in other words, "the multiplier effect" is greater. And therefore more money flows. Interesting that the greatest good to the economy comes when you are also doing the greatest good for the neediest in society. Much less money leaves the system and becomes "fugitive".