He's talking about the money multiplier in the economy. the concept is that as you make economic transactions between parties you actually increase the size of the overall economies exponentially. A gets a service from B buys a product from C pays a worker D.
In a recession, A (whose consumer confidence is low) doen't buy the service from B and the series can not occour. All people: A, B,C and D are worse off.
Conversly, in a runaway economy B demands much more service. So much so that B and Z have to both be paid to do it. Then B and Z turn around and try to buy the same 1 product from C. They bid the price up against each other. This is a primo example of inflation. Source(s) Lecture notes from Mr. Logan's class.
LAST WORD: Squaring the Economic Circle
A. Humorist Art Buchwald illustrates the concept of the multiplier with this funny essay.
B. Hofberger, a Chevy salesman in Tomcat, Va., called up Littleton of Littleton Menswear & Haberdashery, and told him that a new Nova had been set aside for Littleton and his wife.
C. Littleton said he was sorry, but he couldn’t buy a car because he and Mrs. Littleton were getting a divorce.
D. Soon afterward, Bedcheck the painter called Hofberger to ask when to begin painting the Hofbergers’ home. Hofberger said he couldn’t, because Littleton was getting a divorce, not buying a new car, and, therefore, Hofberger could not afford to paint his house.
E. When Bedcheck went home that evening, he told his wife to return their new television set to Gladstone’s TV store. When she returned it the next day, Gladstone immediately called his travel agent and canceled his trip. He said he couldn’t go because Bedcheck returned the TV set because Hofberger didn’t sell a car to Littleton because Littletons are divorcing.
F. Sandstorm, the travel agent, tore up Gladstone’s plane tickets, and immediately called his banker, Gripsholm, to tell him that he couldn’t pay back his loan that month.
G. When Rudemaker came to the bank to borrow money for a new kitchen for his restaurant, the banker told him that he had no money to lend because Sandstorm had not repaid his loan yet.
H. Rudemaker called his contractor, Eagleton, who had to lay off eight men.
I. Meanwhile, General Motors announced it would give a rebate on its new models. Hofberger called Littleton to tell him that he could probably afford a car even with the divorce. Littleton said that he and his wife had made up and were not divorcing. However, his business was so lousy that he couldn’t afford a car now. His regular customers, Bedcheck, Gladstone, Sandstorm, Gripsholm, Rudemaker, and Eagleton had not been in for over a month!