Economics of Prosperity

It is important to distinguish between spending that attracts new money to a community and spending that circulates money already in the local economy. When I walk up the street to the local coffee shop and buy a cup of coffee, the coffee shop has additional money, but because I live locally, the community itself has no new money. In contrast, if an out-of-town salesman purchases a cup of coffee, both the coffee shop and the community have generated new money.

Attracting new money or outside revenue is a critical first step in creating a Magnetic Community; identifying the sources of outside revenue is a good place to start. If a person lives in a college town or near a military base, it may be quite obvious where new money is generated. If a community is located in the mountains or on the coast, tourism may be the source of new money. Rural towns may rely on agriculture or a major manufacturer. In any case, it is important that communities know how outside revenue or new money is entering the local economy.

Because all communities lose money to outside spending on things like electric bills, mortgages, health insurance, vacations and automobiles, etc., it is critical that money lost to outside spending is replaced. Communities that prosper and grow not only replace the money that flows out, they also add to the overall amount of money in circulation. This process of attracting and retaining outside revenue provides the means for sustaining and growing local economies. In a surplus community, the net inflow of money helps the local economy expand, while in a deficit community the net outflow causes the local economy to contract. Because no community can retain one hundred percent of the money in circulation, attracting outside revenue is the key to prosperity and why new money is king.