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Death by Savings

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  • Thu, Dec 25, 2008 - 02:07pm

    #1

    machinehead

    Status Silver Member (Offline)

    Joined: Mar 18 2008

    Posts: 241

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    Death by Savings

In a typical recession-related pattern, the personal savings rate
has started to climb. The linked chart shows that a 3-month moving
average of the savings rate has moved from near zero to as high as 3
percent in recent months —

http://www.calculatedriskblog.com/2008/12/savings-rate-starting-to-recover.html

In
one sense, this is a healthy development — people shouldn’t be living
in La-La Land with zero savings. But the downside is that much of these
new savings comes directly out of consumption — that is, right out of
the top line of GDP.

Theoretically, of course, savings gets
recycled as investment. But short-term, if people save money that they
formerly were spending on non-essentials, consumption drops overnight,
while investment responds only slowly.

The real nightmare would
be if folks get so scared that they repudiate our state religion —
Consumerism, with a capital ‘C’ — and fall into the heresy of saving
10 or 12 percent of their incomes. GDP would take a 10 percent spill
… which would feel exactly like deflation, even though it’s not
really the same thing.

Search your children’s bedrooms for the deadly graven image of the piggy bank — our path to national destruction. LOL.

  • Thu, Dec 25, 2008 - 10:47pm

    #2
    mred

    mred

    Status Bronze Member (Offline)

    Joined: Apr 08 2008

    Posts: 56

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    Re: Death by Savings

http://mises.org/story/3194

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