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One of the hallmarks of a recession is also a reduction in consumption. To iterate on that point, if people decided not to buy the latest and greatest phone, y
by Illniyar 7y ago
One of the hallmarks of a recession is also a reduction in consumption.
To iterate on that point, if people decided not to buy the latest and greatest phone, you would assume that in a growing economy they'll use the new available income to buy something else.
- AznHisoka 7y agoSo then more people are saving more money. Isnt that a good thing? After all, someone else just noted that 60% of the US population has less than $1000 in savings. which is a pitiful amount. What do we want them to do? Spend more to keep the economy going or save more so they dont live paycheck to paycheck? Seems like we cant have it both ways.
- pjc50 7y agohttps://en.wikipedia.org/wiki/Paradox_of_thrift https://en.wikipedia.org/wiki/Paradox_of_thrift : one person's consumer spending is another person's wages, so an aggregate increase in consumer savings will put people out of work.
- AznHisoka 7y agoOk that is a theory. But again I am asking: should more people be spending more instead of saving more? Given more than 60% of americans have less than $1000 in savings.
- yeahitslikethat 7y agoRich people and the government should spend more. Workers should spend less.
- rimliu 7y agoOk, you save a lot of money and die with a nice sumo in your account. Now what?
- AznHisoka 7y agoGiven 60% of Americans have less than $1000 in savings, you are proposing they keep spending rather than saving more? makes sense.
- woobar 7y agoIt is not a given. Numbers differ depending on what you count as savings. Closest to your estimate is "29% of households have less than $1,000 saved."[1] [1] https://www.magnifymoney.com/blog/news/average-american-savings/ https://www.magnifymoney.com/blog/news/average-american-savi...
- thorwasdfasdf 7y agoyou're asking the wrong question. If you die, then it doesn't matter how much money you have. The problem is living. If you're living and you have No money, then it really really sucks (at least in the current day, the way everything is made you can't do anything without money, can't even have a home and live in peace without money)
- empath75 7y agoIt’s possible they’re saving money and also possible they’re drowning in debt and have no free cash flow.
- dajohnson89 7y agoIt's well-documented, that the latter is the case. Not even up for debate...
- Illniyar 7y agoSometimes it is, sometimes it isn't. Too much saving can cause economies to collapse just as too much spending (and debt) can. It also depends on what you do with that saving. If you keep it under your mattress than it's as a whole bad for the economy since money (and hence value) is taken out of circulation. But even if you invest that money than it might not be good for the economy. In theory, if there is less consumption then there are less things that are being sold. That means companies make less profit, which in turn means investments yield less value. If enough consumption is reduced, saving could even result in negative value (I.E. you lose money). In fact during a depression it is common for governments to artificially increase consumption to boost the economy (whether by public works or reducing interest rates). Of course those are extremes. In reality less consumption could turn into a better and perhaps more equal economy or it could turn into a vicious cycle and a depression. Historically speaking though, reduced consumption is usually a precursor to reduced economical growth and accompanies a depression and not the opposite.