Life of Pookah

Article at Fox News: Frugal Americans Hurt The Economy

The article summarizes nicely in this line: “Economists call it the ‘paradox of thrift.’ What’s good for individuals — spending less, saving more — is bad for the economy when everyone does it.”

Hogwash.

Pure bull waste has more value than this reactionary garbage.

Saving more money — putting money into banks, stocks, and other financial vehicles — is a bad thing? So tell me, “Economists”, where do banks get their money to loan out to people? Do they just print it up in the basement? Do they beg for a taxpayer-funded bailout (and beg the question, where do taxpayers or the government get the money for that bailout)? Or do they get it from people who increase their savings?

Idiots.

Let’s try reworking this theory:

“Economists call it the ‘paradox of thrift.’ When the economy tanks and people lose around %50 of their investment and savings value, they wise up — spending less, saving more — so that their homes aren’t foreclosed on. This causes the market to contract sharply for the short term. But the long term benefits are a more stable and growing economy since individuals and financial institutions will have more assets available to them for extending and maintaining credit.”

Imagine this counter-point:
What if %30 of American taxpayers saved %10 of their income in a bank, money market fund, or investment service – towards a down payment on a house, towards a car to buy in the future, towards a flat-screen plasma TV, whatever? What if they did that steadily for 10 years instead of borrowing on credit for ten years? (Does this pattern remind you of the opposite of what’s been going on for the last decade? If yes, give yourself a kitty treat. Just don’t tell Pookah.) What would the total assets available in banks and other financial institutions be now? Wouldn’t American taxpayers (y’know, “consumers”) be able to still buy products sold in this country? Don’t you think that would have cushioned the hit caused by this recession? Did the reporter even bother to ask these obvious questions?

Reality check, Fox: The “economy” is still correcting. That “consumer debt” still has to be paid, or the consumer loses his/her purchasing power and critical assets – like a home. With employers performing credit checks to weed out prospective employees, the “consumer” has NO CHOICE but to go sane: Act more frugal, save more money, and pay off debts. Of course people are turning towards saving more – en masse – now. Just like they turned to spending more – en masse – back in the late 90′s. It is a logical and reasonable reaction.

There is no paradox here. There is only cause and effect.

Methinks someone was hunting for a sellable article, loaded with “controversy” and “spice”.

Maybe they’ll send someone under cover into the economy to find out what’s really happening. Y’know, all secret agent and stuff. Or maybe run a critique or counter-point to the article, and link it in so that the “reporting” isn’t one-sided. That used to be a reporter’s job.

(Was that enough contempt?)

Yes. Now, what was that about a kitty treat?

Whups.