Many people feel that once money is spent, it's gone.

You work hard and earn 10,000 yuan, then turn around and buy a new phone. Your account is emptied, and it feels as if the money has vanished into thin air. From an individual perspective, this feeling is completely reasonable; but from a broader view—looking at the entire economic system—this idea is entirely reversed. Money never truly disappears; it just moves into another pocket and continues circulating.

Let's use a real-life example to understand this better.

Suppose Xiao Li takes out a 1,000,000 yuan loan from the bank to buy a house. Many people don't understand this detail: the act of taking out a loan is the moment when new money is created. After Xiao Li receives the money, he hands it over to the real estate developer, and his account resets to zero. However, the money has just moved location—from his account into the developer’s pocket.

The developer doesn't sit idle. With the 1,000,000 yuan, they bid on a piece of land, and the money goes into the government’s account. The government also doesn't let the money sit idle and start to rot; instead, it invests directly into municipal projects, contracting construction teams to renovate a dilapidated city street. The construction company, having secured this 1,000,000 yuan project, works for two months, and upon completion, the money is divided into workers’ wages, which are paid to ordinary laborers.

Coincidentally, phone brands are currently running promotions. The workers, holding their freshly earned wages, are easily attracted and buy the latest models of phones. The 1,000,000 yuan flows into the accounts of the phone manufacturers. By the end of the year, phone sales surge, and the company directly awards a 100,000 yuan year-end bonus to its executives...

Do you understand now? This 1,000,000 yuan is always circulating. No money has truly disappeared; it is just continuously moving from one person to another, from one industry to another. You might think the money you spent is gone, but in reality, it has just left your sight.