How does hard cash flow into our economy? The executive rolls in on a private jet with his/her family: rents an executive cottage with five bedrooms, five bathrooms, a pool, and ocean views, purchases a car for the missus, gets the kids in private school, joins the golf and athletic club, picks up a little runaround skiff for weekend boating, and away they go. He incorporates a company, hires offshore and onshore staff, leases a dedicated cab service, purchases office accoutrements in keeping with his corporate style, chooses office space, has it designed and fitted up, swings in the IT infrastructure, leverages venture capital pals to ante up some capital and presto in business. In addition, to celebrate, a sunset cruise for all senior management at $10,000 per evening. All big money, all paid for in hard currency cash, dollars, pounds, or Euros. Most graciously, he agrees to accept some pink and blue Bermudian money for use in obtaining necessaries needed while here.

Sorry, folks, the use of the word he is only used as a convenience. It is not intended, nor imply only one gender succeeds in business.

The tourist gets off the oceanic motel: strolls smiling through our welcome gates, rents a motorbike, boards a bus, has a beer and a burger, buys some T-shirts, takes a glass bottom cruise for visual delights to recount on their adventure to folks back home, feeds the fish from off his bee-buzzing jet ski and is back on board, consumes a large buffet evening meal and then snug in his bed as the ship silently casts off, headed home.

The business class traveller bops off the plane with wallet and computer bag - the only gear needed. He is a man in a hurry. Books in a hotel, launches a 14-hour day with ten sales presentations to like minded financiers, has two large corporate meals while entertaining said clients, might buy a lovely trinket - a Vuitton bag - for that special person back home. Next morning, he crams in four more meetings and just makes the business special flying out at 11 a.m.

The luxury traveller looking for the sea-splashed joyous sunset, superb service and amenities, peaceful surroundings, ease of access, gourmet meals and sunshine. They have found it all. They come every year for ten days from the United States, France, Italy, UK and so on.

The Multiplier Effect. Add up all those initial touch points where cash traded hands. Good cash, hard major country money backed by massive industrial nations, their products, their people, their trade, their governments. Good as gold in any transaction. How many can you come up with from these descriptions? Use your imagination. At a minimum count, those underlined number around 30, all representing opportunities to diffuse the initial cash contribution. Now, let us look at the underlying services and products multiplier effect: services: airport, fuel, meals, customs, education, rental units, maintenance, chef services, personal needs, dry-cleaning, groceries, caretaker, boating needs, cab license, attorney, accountants, construction, architects, office designer, landscapers, plumbers, electricians, mechanics, hardware, retailers, public transportation, electronics, employees, trainers, banking, mortgages, restaurants, investments, custody, pharmacy, medical, dental, insurance, pensions, and even funeral homes. This list could be exhaustive and is certainly is not inclusive. A prize to the reader who can come up with the biggest group, I mean it!

It is a party. Everyone earns some, spends some, saves some. Basic multiplication. If 30 people are initially paid by the first business group, they in turn use some of those earnings for their business and personal needs by each of them transacting with ten more people who are again paid through their endeavors. They also save some. We are at a total of three hundred people with just one set of transactions. Now, 300 people have additional cash to take through the cycle: earnings, spending, saving. In only two degrees of separation, this business has filtered money through the economy to three thousand people. At three degrees, this original cash in increments has now reached 30,000 people - almost half of our entire population. This type of compounding is called raising to a power, and it is - very, very powerful. That is how it works in a booming economy. The money in circulation is multiplied again and again. In a trickle down effect, almost everyone benefits.

Pipelines have faucets. Think of this money cycle as a pure pipeline that instead of gushing oil down the funnel, it gushes dollars. How much cash continues to pour in and stay is a function of several economic components: the value of the product for sale, the confidence in the present, and the perception of the future.

Next economic article: The pipeline effect on individuals, businesses, and the government budget. What happens to the money supply when the pipeline tap is turned down by say 10 percent, or 25 percent, now partially off and the flow goes down? The Economist Intelligence Unit reported this week that our government will spend more and raise less revenue than it has budgeted. What happens when we, as individuals, overspend?

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP is a Certified Financial Planner™, and a Partner at Patterson Partners Ltd. She provides independent fee-only cross-border tax, estate, investment, and strategic planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people, and US citizens living abroad. For more information, contact mmyron@patterson-partners.com or phone 296-3528