New threat to the economy: Americans are saving like it's the 1980s (opens in new tab)

Even with the macroeconomic effects as valid the mode of thinking is so painfully backwards and entitled in so many ways.

1. The job of the producers is to produce what the consumers want, not the consumers to accept whatever they want to produce! It is not a birthright to guaranteed profit from whatever they want to produce being sold. That has never existed. It brings to mind every idiot CEo of a business which failed to adapt bemoaning "murder by millenials" and wondering why they aren't getting new customers among those they insulted for products they don't even want in the first place.

2. If credit flow is required for the economic velocity it hints at an insufficient amount of solid currency in the economy and the interest costs are deterring spending exactly as intended. Even if taken for granted that the boost is needed doesn't mean that a consumer credit bubble is the best way to do so.

2a. If saving is not desired behavior retirement must be guaranteed in spite of lack of it. Asking for changes with no viable alternative is a fundamentally an unreasonable demand in negotiation. If you don't want a population explosion as 8 kids is the accessible way to be supported in old age then provide elder's pensions or stop complaining about population growth.

2b. Even if they could keep on using credit until they die the gains would be unrealized as the music stops even after they claimed the estate the debt would be written off. Continually rising consumer debts are a bubble because they are not immortal conglomerate entities like corporations or governments.

3. A drop in demand given available means of payment or credit implies a failure to at the same provide utility and provide a pathway to payment.

Essentially the answer to the economic problem isn't more consumer debt and pretending this fine but solving the root problems in a profitable way.

Bitch about people who didn’t save for an emergency expense or for retirement. Bitch about people who spend frivolously. And now, miraculously, bitch about people who are saving.

This is not a complex problem. If you want people to spend money you must give them a proper safety net. That means pensions and health care.

Wow they criticise you when you spend and now they criticise you when you save.

People should save even in a healthy economy. You should always have emergency fund + additional saving to reach your goals.

Investors do save as well. Much more than average consumers. The difference is that average consumer doesn’t have enough to buy assets or diversify their saving as much as investors can do.

Profligate spending has been good for the consumption based economy, and bad for the vast majority of Americans who lack rainy day savings. Let alone something more serious.

If self-reliance and personal fiscal responsibility is a "threat to the economy" then the economy is part of the problem.

It's only a problem if you subscribe to (in my opinion, the flawed and incredibly destructive) modern economic theory which is largely a continuation of the Keynesianism of the mid-20th century. Ask any economist why deflation is a bad thing and they will generally tell you that it is because they want to avoid a deflationary spiral with collapsing prices and high unemployment, which is why they want to ensure that consumers mindlessly consume and ensure that prices are kept "stable" (in their opinion, stable prices mean a positive inflation rate of 2%, which in my humble opinion does not make sense in pure mathematical terms).

However, there are two fundamental and overlooked errors in the assumptions that underlie this theory:

a) there is an assumption that consumers/agents are homogenous in their preferences and that people would rather starve to death than give up the opportunity to spend their money when it is worth more in the future. No sane person is going to wait one year to wait out some insignificant appreciation in the value of the money. People will still need to consume food and many of them would prefer to buy things now than in the future (consumer time preference, i.e. the desire to want things now rather than later, is always positive). For some inexplicable reason, time preference is completely ignored in the foundations of the theories that underpin modern monetary policy.

b) the second main assumption is that money saved is money that is unproductive. This is false: savings lead to investment in the economy as resources that would otherwise be consumed are redirected into lengthening production structures in the economy. Put simply, this means that if more people put money in the bank, the bank will have more money to lend out and interest rates would fall, allowing entrepreneurs and companies to invest in production structures which in the long-run will lead to higher quality goods and cheaper prices.

Of course, in the current highly distorted economy, deflation is disastrous as companies which are addicted to debt will need to be liquidated as there is no longer a steady stream of money coming in through inflation. This will likely lead to a severe recession, but this is not a bad thing as in the long-run the economy is better off as inefficient businesses who are addicted to debt and cheap money will no longer be able to operate, and clever entrepreneurs will be able to take their place.

It is savings that build up capital structures in the economy, not consumption which largely distorts and even destroys said structures, and the faster we stop this destructive inflationary monetary policy the faster we return to sustainable, fair, and real economic growth.

"Average people are saving enough for an emergency." Am I missing something here?

On balance this is a good thing but any trend taken too far is a problem.

That being said the time to safe is when the economy is good not in the heart of a crisis. It’s sad that human cognition is so short sided and blind to long term risk. It’s sad that 20 year olds ignore retirement and lose compound interest and then scramble to save in their 50s.

As bad as it is, I feel like this is our chance to do some large scale norm changes. Eg. Shorter standard work week, more time off. No as some liberal/socialist agenda but as a way to reach full employment again. I don’t think we’re ready for basic income, but whatever the right stepping stone is, I think govt has a big enough reason to address it now.

Edit: our/we = US, habit and context of article

So stim everyone again. That's just a tax on the entire population that will give the poorest some spending power. Stim everyone really hard. Consumer-level QE, HM, whatever. Apply stim to forehead.