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More like they took the wrong kind of risk. The problem was that people were expending their future incomes on present consumption-- e.g. by borrowing money to
by pg 18y ago
More like they took the wrong kind of risk. The problem was that people were expending their future incomes on present consumption-- e.g. by borrowing money to live in luxurious houses. It would not have been so bad if they'd been been borrowing money to invest it in productive assets, like more efficient machines for their businesses.
- jwilliams 18y agoAbsolutely 100% agree. As I mentioned in my other comment - this is why I'm pretty suspicious of measures that are to (simply) stimulate consumption and not production. At best this is really an extremely short-term stopgap.
- shader 18y agoIndeed. I didn't say that risk was bad, necessarily. Rather, encouraging risk to avoid a non-existent paradox of thrift is a dangerous thing. Personally, I think that the news about people losing less money at casinos is a good thing. They are much more likely to be able to invest it in worthwhile endeavors having not lost it ;) Also part of the problem is that everyone was consuming their present and future income (negative net savings rate) - as opposed to some borrowing and consuming the present savings of others. As such we were actually consuming present capital and reducing our future income, as evidenced by the recent downturn.