Until the latest "meltdown" we were told we, the public, were not saving and were going too far into personal debt. So now here we are saving and not using credit as much. OOPS. So now a quandary. What to do; save in case you lose more of your income or spend to boost the economy?
At President Obama's press conference he was asked about this very thing. He answered fairly well. He basically said that right now we have to spend but later we will encourage spending.
OK. But I still am not sure about this balancing act between saving and buying.
There is a fair answer on line in the business section of the New York Times. The column is "To Spend or To Save? Trick Question" written by David Leonhardt.
(http://www.nytimes.com/2009/02/11/business/economy/11leonhardt.html?ref=business)
In the column Mr. Leonhardt mentions John Maynard Keynes' paradox of thrift:
"Economic concept that if everyone tries to save an increasingly larger portion of his or her income, they would become poorer instead of richer. This is because the economy will slow down from reduction in demand and the very same people would lose their jobs. This theory, however, applies mainly to Keynesian economics where increased savings represent a diminishing circular flow of income."paradox of thrift(BusinessDictionary.com. Retrieved February 11, 2009, fromBusinessDictionary.com website:http//www.businessdictionary.com/definition/paradox-of-thrift.html)
From this definition, you can link to other articles about this subject. Some will go into the differing views on the "paradox". After all it is a paradox.
Mr. Leonhardt's column won't make you feel great nor totally answer your fears about spending but it is good for a little education and food for thought. Which is maybe what a column should be.
Just remember this you and I have to decide what we Can do and what we feel comfortable doing.
Thanks much for sending me the link. Judging from these first two entries, I can tell that your blog will be thought provoking and informative—and best of all, down to earth and relative to most. I enjoyed perusing the articles you sourced. The paradoxical options are interesting to ponder. Since I no longer earn or receive enough income to consider saving, my personal choices are whittled down to zero. That said, these are important concerns and I think you will get some interesting conversation going here. I subscribed as a follower and I will check often. Thanks again for the heads up! Pat
ReplyDeletePS, Love that picture!
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