What impact on the economy occurs when migrant workers send american money back home?

I read the article on Yahoo that said some 25billion dollars of american money is sent back to mexico every year from migrant workers. What type of impact does this cause to our own economy? How much does this play into our recession?

Money by itself doesn’t mean anything, because money is simply a medium of exchanging goods and services without having to rely in barter. What is really important to an economy is what is being produced and consumed, not money per se. As you can see in the volatility of the stock market, vast amounts of money "disappear" in a couple of days. Where does it go? Does it matter? Are we really poorer?

The money being sent overseas was given to the immigrants in exchange to their labor, which helps the US produce goods and services that are consumed here and abroad. The money given to the workers is just a symbolic "I owe you" by the government, effectively saying "you produced all of those shoes that will benefit American consumers, so you can take these pieces of paper and exchange them for whatever good you want." Instead of buying things, they send the money back to their families.

How does that affect the American economy? It depends on how the recipients of the cash decide to spend it. Do they buy American made sneakers? Or tickets to watch the latest Hollywood flick? Even if they buy something produced domestically, any increase in their national wealth is going to increase their country’s ability to develop, which in turn will discourage illegal immigration and make it a better trade partner.

4 thoughts on “What impact on the economy occurs when migrant workers send american money back home?

  1. Nothing really. Money has its unique system of making it back to our hands. The particular reason is that it is not only Mexicans doing this, it is people from Central America, South America (too many countries there!), Cuba, Puerto Rico, and even the Dominican Republic that do this "sending of American money" back to their people. But they are just doing honest & productive labor on their behalf.
    Tourists from other countries help in bringing that money back to this country as well. It is actually silly to say that money just gets sent to another country and that is its final stop. It might have an impact to those sending the money since their socioeconomic status might not be great to begin with (migrants). Otherwise, it isn’t hurting me and I am of middle-class.
    I believe it is just another way of government telling us that they do not know themselves how to control U.S. money. Look at gas prices now. I wonder what kind of deal they have with Saudi Arabia and those other countries that give us oil. They control those prices… . … . …
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  2. Look at it from the standpoint of a government tax-collector:

    Every dollar paid that is spent in the US is taxed and I get a cut (to keep the math easy, say 1% = 1 penny on every dollar.)

    Again, to keep the analysis simple, assume that everyone starts with no money, and the government has it all.

    That means for each $1 the government spends, if the money stays in the US and participates in 10 transactions, then as the government, I get 10 cents. After 100 transactions, I recover my $1!

    Now, once the money is sent abroad, I don’t collect anything on any subsequent transactions. In particular, if the money only changes hands 10 times before being exported, I only collect 10 cents — I never recover the $1 I spent.

    Recovering that $1 is important because the government can then spend it again, and recover it again — effectively driving the economy entirely within a tax-and-spend framework.

    The only way to recover money that is exported is to sell something to the foreign governments/people and require that US dollars be paid in return. That opens a new can of worms: trade deficits, foreign exchange rate, political-economics (sell nuclear weapons or similar weapons technologies to foreign governments?! hmm …), management of the global economy…
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  3. Zero effect.

    If you look at a conservative count of money supply in US (M2), it’s over $8 trillion, so this would be something like 1/400th of just M2. On a monthly basis, assuming $2 billion going out is 1/4000th of M2.

    Over the next two years, the US government will probably be borrowing over $1 trillion from just foreign debtors, so the money coming in will completely overshadow this amount going out.
    References :

  4. Money by itself doesn’t mean anything, because money is simply a medium of exchanging goods and services without having to rely in barter. What is really important to an economy is what is being produced and consumed, not money per se. As you can see in the volatility of the stock market, vast amounts of money "disappear" in a couple of days. Where does it go? Does it matter? Are we really poorer?

    The money being sent overseas was given to the immigrants in exchange to their labor, which helps the US produce goods and services that are consumed here and abroad. The money given to the workers is just a symbolic "I owe you" by the government, effectively saying "you produced all of those shoes that will benefit American consumers, so you can take these pieces of paper and exchange them for whatever good you want." Instead of buying things, they send the money back to their families.

    How does that affect the American economy? It depends on how the recipients of the cash decide to spend it. Do they buy American made sneakers? Or tickets to watch the latest Hollywood flick? Even if they buy something produced domestically, any increase in their national wealth is going to increase their country’s ability to develop, which in turn will discourage illegal immigration and make it a better trade partner.
    References :

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