The Franklin Times -
As the global economic crisis continues, a new economic principle is taking hold. The paradox of thrift revolves around the good and bad of personal savings. Saving, at the personal level, is a smart and economically rational decision. Saving is not only rational but is also responsible for it prevents one from spending outside one's means.
Yet, saving also as a dark side that is based in the aggregate. When taken collectively, some personal actions can be detrimental to the common good. Thus the paradox. Saving has a collectively negative effect on the economy. If everyone saves than consumer spending drops making it harder to emerge from a recession. Newsweek's cover story focuses on this problem. Please follow the attached link, read, and comment.
Newsweek: Stop Saving Now!
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4 comments:
This article explains the reason that Team PAPI is trying to cut taxes to the lower class. Lower class citizens are the least likely to save, thus the most likely to spend. Whereas the upper class are most likely to save and the least likely to spend (especially on domestic goods). Therefore, tax cuts to the lower class are pivotal.
The issue is not as much about thrift as self-control. People can spend, but they should only get what they need when they need it. Buying a $50,000 car when you only need a $25,000 car is ridiculous. People need to learn that they can't have everything they want, especially right when they want it. Use self-control.
Your theory SOUNDS good, but i'm afraid it isn't. The reason: your theory is being put into practice as we speak. People are only buying items that they need (or for some, not buying anything at all, due to the lack of a job) and the economy is STILL suffering. Put a little thought into your plan next time and stop wasting valuable comment space.
It’s all too obvious that saving money does not rejuvenate the economy. While it may be beneficial on an individual level, hoarding money away does nothing to help the national economy, which in turn, hinders the prosperity of individuals. Thus, saving money could actually be viewed as harmful to the financial well-being of the individual. While an entire population is attempting to make financially smart decisions by saving money, the total profits of all businesses decline. To make up for these losses, companies will be unable to raise salaries and will most likely resort to downsizing. Once families feel the strain of having a once regular provider now unemployed, they will believe it is necessary to save now more than ever before. The entire issue is a vicious cycle, a trap that leads to greater recession and higher rates of unemployment with each revolution. To counter this problem, people need to overcome the instinctive fear that spending during an economic recession will lead to financial ruin for themselves. It is needed to revive the economy. The paradox of thrift is that the amount people are able to save will remain the same while their income will decline; thereby creating an imbalance that worsens the economy.
The Fanatical Party endorses the purchasing of green technology. Yes, such products are quite expensive, but large government spending is needed to stimulate a recovery and purchasing this equipment helps the environment and the benefits of this technology will pay for itself in the future. To help on a more individual level, the FP believes one of the best types of people to help return the economy to its former self are the people who simply can’t afford to save money. People who need every bit of income they can get just to buy the essentials are the ones who are putting money back in circulation and helping businesses out. That is why the government needs to provide funds for the impoverished to buy the basics such as food and clothing.
The FP feels it is imperative for the entire population to be educated on this matter, so that everyone can lend a hand in stabilizing the economy. In this situation, saving money can be more detrimental than spending it.
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