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mwarden 1062 days ago

What a stupid and irresponsible article. There is no such thing as saved money, only money spent now or spent later. Money that is saved does not disappear. What a ridiculous, ridiculous article. If our economy is so dependent on people blowing their savings, then the economy needs to be corrected.

BradleyJohnson 1062 days ago

Economists are fairly familiar with something called the "paradox of thrift." While saving allows investment in other businesses, if no one is consuming any other products, it doesn't matter what capital is available to invest, there's nothing to in which to invest it. If everyone's only buying peanut butter and bread, there's no point in starting new companies because no one will buy your product. At which point what reason is there to save, since no one has any use for your money.

mwarden 1062 days ago

@BradleyJohnson, the paradox of thrift does not invalidate the point that saving money does not remove it from the economy. There is only two types of money: money spent now and money spent later. The "paradox of thrift" really has to do with Federal Reserve manipulations and government programs that provide safety nets, both of which have encouraged the populace to burn through the savings they had built up. This is great in the short term, but spending more than you earn is not sustainable. Worse, this "foot on the pedal" policy causes the market to invest in those non-peanut-butter businesses you allude to, and when the savings runs out, the business owners realize there is no normal market for their products or services. So, now we've got malinvestment to boot.

BradleyJohnson 1062 days ago

The point is that the author is not suggesting that everyone should spend ridiculously, but if everyone significantly scales back their purchases, especially in an economy where 70%+ of GDP is consumer spending, you're going to have serious problems. No one is suggesting that saving money removes it from the economy, but there is also a component of the "velocity" of that money. Quite simply, if no one purchases anything, there's no reason for anyone to make anything.

sunnyspeaks 1061 days ago

Stop saving? So, are we going to eat anything we get without thinking about the future?

chrispycrunch 1061 days ago

I agree with what mwarden said. The consumer is not in a position to spend right now. They need to build their savings and buy what they need, not what they want.

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