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Agree. It's almost impossible to determine the correlation, if it exists at all. On your later point, ironically if everyone now decided to save more, this wou

by mtpark 17y ago

Agree. It's almost impossible to determine the correlation, if it exists at all. On your later point, ironically if everyone now decided to save more, this would not have a positive effect on the economy.

brandonkm 17y ago
I think saving right now is one of the smartest financial moves families can make. One reason being that if people have a stronger asset base then you not only have the ability to transfer value over periods of time, but you are in more sound financial condition when you buy a house. Think about the scale of the sub prime mortgage market, then think about how things would have turned out during the housing boom (2005, 2006, early 2007) if even 30% of those subprime borrowers had more savings to their names (the vast majority had none). While the financial crisis would have still occurred, maybe banks wouldn't have been hit as hard because a larger percentage of people saving could possibly translate into less people defaulting on their mortgages. The second reason is the resulting taxpayer bailout of the financial institutions. The increase in taxes from all of these recent programs aimed at removing toxic assets from banks balance sheets, increasing liquidity in the credit markets, etc. haven't even hit taxpayers yet. Saving now enables people to react better financially when taxes rise later down the road. I don't think increased consumer spending (on credit) is as reliable a metric of the overall health of the economy as it was, because while the U.S. is a credit driven economy, using lots of credit and having any or little savings are one of those things that led us to where we are now.
- jmonegro 17y ago
  I also believe saving is what families should do, but capitalist economies are based on spending. If everyone saves everything, and spends nothing - or next to nothing - on non-essential commodities, companies will suffer. And we don't need more bankrupt businesses.

by mtpark 17y ago

brandonkm 17y ago

I think saving right now is one of the smartest financial moves families can make. One reason being that if people have a stronger asset base then you not only have the ability to transfer value over periods of time, but you are in more sound financial condition when you buy a house. Think about the scale of the sub prime mortgage market, then think about how things would have turned out during the housing boom (2005, 2006, early 2007) if even 30% of those subprime borrowers had more savings to their names (the vast majority had none). While the financial crisis would have still occurred, maybe banks wouldn't have been hit as hard because a larger percentage of people saving could possibly translate into less people defaulting on their mortgages. The second reason is the resulting taxpayer bailout of the financial institutions. The increase in taxes from all of these recent programs aimed at removing toxic assets from banks balance sheets, increasing liquidity in the credit markets, etc. haven't even hit taxpayers yet. Saving now enables people to react better financially when taxes rise later down the road. I don't think increased consumer spending (on credit) is as reliable a metric of the overall health of the economy as it was, because while the U.S. is a credit driven economy, using lots of credit and having any or little savings are one of those things that led us to where we are now.

jmonegro 17y ago
I also believe saving is what families should do, but capitalist economies are based on spending. If everyone saves everything, and spends nothing - or next to nothing - on non-essential commodities, companies will suffer. And we don't need more bankrupt businesses.