OR…Is Saving Money Bad for the Economy?
By Kevin M
I came across this article a few weeks ago, Industrial output falls as consumers cut back spending, and have been trying to decide what it is about it that I find so disturbing. I’m not targeting it as some sort of special case; in fact it’s one of hundreds of articles I’ve read saying pretty much the same thing. News program talking heads trumpet it all the time. Loosely, what’s good for your bank account is bad for the country.
Do we actually believe that line of thinking, or do we just politely tolerate it? Surely we have to know better!
Now, I try not to do macro economics on this site, but it seems to me that this idea that the citizenry saving money is bad for the economy is some sort of article of faith that no one questions, at least in higher circles. And I don’t buy any of it!
From where I sit, it seems that the absence of savings is at the heart of our economic troubles. When a person has no savings, he lives paycheck-to-paycheck and is forced to borrow or turn to the government when he needs money in excess of his regular cash flow. In most households, this will happen most of the time—life’s just that way I suppose. But that conundrum is what gets the debt treadmill going, and once you’re on it, default is just a matter of time.
Multiply that by millions of households and you get…about where we are right now.
