Even though Magnetic Communities seek to attract and retain money, attracting new money remains the top priority. New money is king because communities cannot retain and circulate money they do not have. All communities lose money over time to things like vacations, new cars, utilities, state and Federal taxes, etc. New money not only replaces money that leaks out of every local economy; it is also the source of economic growth and prosperity.
Attracting New Money
In this traditional economic development example, local businesses sell goods and services to customers outside the local economy. New money is attracted to the local economy when customers pay for goods and services. Both the local economy and local businesses are better off and have more money to spend.
When local businesses sell goods and services to local customers, money is circulated and retained in the local economy but new money is not attracted. In this illustration, the entire transaction takes place within the local economy. Local businesses have $800 more to spend but the local economy has no additional money.
Just because new money is king is no reason to focus entirely on attracting money. Many communities with traditional economic and community development programs fall into this trap. They declare success every time a source of new money is announced. But how much of that new money actually benefits the local economy? Money has to be retained and circulated locally if it is going to maximize its potential for creating prosperity.