It is impossible to escape the anxiety that exists in our country over the state of our economy.We all feel pain, we all have an opinion, and we all have feelings about the steps our government is taking to stimulate our economy.

In the midst of this, what can one person do? Is it possible for an individual to make a decision that in a small way, creates a local stimulus? Suppose a note holder sells his note - what effect could he have on the local economy?

Well, look at this. A person sells a note because he wants to buy a business. Remember, cash is valuable in a down market because of "opportunity". He takes the six figure check he receives and deposits it in his bank. His bank now has a demand deposit, 86% of which can be loaned out( banks are required to keep 14% as reserves). And yes, some banks are loaning money and some people are qualifying ! He purchases the business, and the seller of that business receives a check, which he deposits in HIS bank. The bank can now loan out 86% of that amount. With me? Banks need demand deposits so they can loan out money. Our note seller remodels his business building and hires a contractor, electrician and plumber. What do they do when they get paid? They deposit their checks in the bank, giving their bank an opportunity to loan out 86% of their deposits and put more money into circulation. This circle of money continues and helps to stimulate the economy by giving people work and banks funds to loan out. Our note seller buys new furniture, hires new employees and when the business is up and running, he has a product or service to offer his community, thus helping to create more dollars flowing through the local economy.

I did not get an A in economics and I realize my example is a simplified one. But the reality remains that a simple decision to sell a note can create a domino effect way greater than the cash value of the note itself. This seller, perhaps without realizing it, may have taken an action that results in an immediate positive impact as our government struggles to find workable solutions.


Denny Stanz