Is Saving Money Bad for the Economy?

I have a problem with saving. At least, I should say, I have a problem with saving 'money'.

I do not believe that 'a penny saved is a penny earned', primarily because a penny saved becomes less than a penny almost instantly due to inflation. Once that inflation balloons (which it will), it will be likely to destroy the vast majority of Americans long term savings in a heartbeat.

It reminds me of the story about the unfortunate saver in 1920s Germany who had some 40,000 marks saved over his career and received a letter from his bank saying that they were returning his balance.

The good news was that the smallest unit of currency available was 1,000,000 marks so that is what he received back. The bad news was that the stamp on the envelope cost 5,000,000 marks.

While I do not expect things to be that bad when the hammer falls (the dollar is still the preferred international currency after all), it is still fiat currency nevertheless.

In the end, I do recommend saving but, not in fiat currency.




Is Saving Money Bad for the Economy?

Our grandparents believed in the value of thrift, but many of their grandchildren don’t.
That’s because cultural and economic values have changed dramatically over the last generations as political and media elites have convinced many Americans that saving is passé. So today, under the influence of Keynesian economists who champion government spending and high levels of consumption, thrift has been devalued.

Keynesian ideas dominate the Obama administration and mass media. Most politicians, including Republicans who often pretend to be friends of thrift and self-improvement, are tacit or overt Keynesians. That’s because politicians, whether they have studied Keynes or not, generally love the idea of cheap money. Most delight in spending taxpayer dollars. They believe this is the way elections are won.

It is the government’s role, Keynes’s followers believe, to keep the boom going through spending. So it is consumption, not supply, that makes a successful economy, they say.

Mainstream media rehashes the message that the consumer, not the producer, is the biggest part of the economy. Politicians agree.

As the economy started to slow down in 2006, President Bush urged Americans to “go shopping more.” Newsweek, in a headline story several years ago, told Americans to “Stop Saving Now.”

Keynesians of all stripes have constantly urged Americans, especially the government, to spend. The effect of this change has been more than numbers. It also changed how many Americans see the path to self-improvement. Joe Sixpack, the average American who once believed that through thrift, hard work and discipline he could save his way to a better life for his family, is the victim. Keynesian economists and mainstream media commentators often depict savers as selfish people.

A former U.S. Commerce Secretary was asked by his Japanese counterpart in the 1970s in Pete Peterson’s book Facing Up, “please explain putting the highest taxes on what you call unearned income. We have always assumed that income from savings was the most earned of all. It is hard work to save, don’t you think?”

Meanwhile, savers are penalized for their thrift. The Fed’s policies mean they receive almost nothing in interest.

Remarkably, President Obama, in the same report, in a move Keynes would have likely applauded, proposes to put a cap on qualified retirement plan balances. Apparently, the president agrees saving is “a negative act.”

Despite the Keynesian sentiments of much of our political and media elites, we owe it to our grandparents to re-learn the lessons of thrift.

it does seem like saving money isn`t all it`s cracked up to be.
it`s probably better to just spend that money on bills or loans that charge interest.
unfortunately it`s seems that many material objects gain value overtime while money loses value.

The other day my daughter was telling me that she has XXX amount of money in her 401k
I told her that by the time she retires that money will only be worth about 10% of what is worth today so if she gets the chance she might as well take it out, pay the 50% tax (or however much it is now) and just spend the money.

reply to post by greencmp


saving is bad when 10 people save 90% of the world's money. leaving 7 billion ppl without savings.

it's not bad when everyone can save. actually when everyone can save it's an indication of a surging economy.

reply to post by greencmp


Yes, tax 100% what isn't spent.

guaranteed comfortable retirement.

Are we consumers or not people? Common!

The best thing would be to cease creating extra money, as a reward or prize in the form of interest.

Every cent, that will be added to all of the the money from interests, causes more money being around, that used to represent the gold standard, being worth a fixed value.
Every added money will make all the money decrease a little, for the same amount of gold it's worth.
This is called inflation.

Eventually, this means that saving money, will increase the rate of inflation, the interest you've earned by saving money, makes the money victim of inflation.

it wouldn't hurt if you did saved it for the future, but it does matter for future economic stability.

Saving money in a savings account is not the way to 'make money'

If you want to make money and beat inflation, you must invest: stock market, commodities, real estate, or maybe antiques/collectibles.

You will never beat inflation, especially when banks can borrow money from the fed at .25%. There is no incentive for the banks to pay YOU any more than that.

It is a HORRIBLE idea to spend your retirement. What you must do is save (invest) more than what you are currently saving (investing) There are various tools out there that will show you how much you need to save today so that you will have an equivalent sum in 50+ years. It can seem quite overwhelming, but it is not something that should be avoided.

reply to post by greencmp


They LOVE for you to save money.
Then they get all the more when they pull a Cypress.

cassp83
Saving money in a savings account is not the way to 'make money'

If you want to make money and beat inflation, you must invest: stock market, commodities, real estate, or maybe antiques/collectibles.

You will never beat inflation, especially when banks can borrow money from the fed at .25%. There is no incentive for the banks to pay YOU any more than that.

It is a HORRIBLE idea to spend your retirement. What you must do is save (invest) more than what you are currently saving (investing) There are various tools out there that will show you how much you need to save today so that you will have an equivalent sum in 50+ years. It can seem quite overwhelming, but it is not something that should be avoided.

Any money you invest is eventually going to make its way into a bank deposit. once deposited it is fair game for fractional reserve banking. talk about inflation...

Is saving money bad for the economy ... hmmm will the economy provide for you when you are old or unable to work.. ?

freedomSlave
Is saving money bad for the economy ... hmmm will the economy provide for you when you are old or unable to work.. ?

If everything we couldn't spend was taxed back to the government?

Yes, there would be plenty to take care of you. If not, make more. It wouldn't matter.

reply to post by greencmp


I have been doing some thought experiments around a consumption tax system at the federal level to replace the IRS (or, change them into a regulatory agency like your state level liquor control agency....TABC in Texas).

One of the big aspects of this is that it would promote savings, especially among the affluent. The economy would not stagnate. I think we would see a huge increase in corporate bonds, though, as a way to create investment capital and to give a hedge against currency rot.

The real interesting part for me is the methodology that current corporations would employ to promote spending would be to force it. Obsolesence an be planned in multiple ways. Like decomissioning servers that specific devices access to function (like when xbox games lose their servers for Live play).

Saving money alone isn't bad for the economy, it's when consumers spend their money on goods and services from large corporations as opposed to contributing to local vendors which in-tern stays in the community to create "local" revenue, which is revenue that contributes and circulates within your own community thus flourishing it's economy.

Helping the economy starts at home.

reply to post by greencmp


That depends what you mean by saving. Not using credit is a good idea, but not spending money at all is not. So I guess it's more about spending within your means, rather than avoiding spending money like the plague.

filledcup
reply to post by greencmp

 

saving is bad when 10 people save 90% of the world's money. leaving 7 billion ppl without savings.

it's not bad when everyone can save. actually when everyone can save it's an indication of a surging economy.

edit on 3-10-2013 by filledcup because: (no reason given)

It is really talking about how Keynesian economists like Paul Krugman recommend that no one save any money and instead spend every penny on the idea that consumerism drives the economy.

Everything we learned from our grandparents about thrift has been systematically attacked resulting in very thin margins of operation at every level of income.

greencmp
I have a problem with saving. At least, I should say, I have a problem with saving 'money'.

I do not believe that 'a penny saved is a penny earned', primarily because a penny saved becomes less than a penny almost instantly due to inflation. Once that inflation balloons (which it will), it will be likely to destroy the vast majority of Americans long term savings in a heartbeat.

It reminds me of the story about the unfortunate saver in 1920s Germany who had some 40,000 marks saved over his career and received a letter from his bank saying that they were returning his balance.

The good news was that the smallest unit of currency available was 1,000,000 marks so that is what he received back. The bad news was that the stamp on the envelope cost 5,000,000 marks.

While I do not expect things to be that bad when the hammer falls (the dollar is still the preferred international currency after all), it is still fiat currency nevertheless.

In the end, I do recommend saving but, not in fiat currency.

Is Saving Money Bad for the Economy?

Our grandparents believed in the value of thrift, but many of their grandchildren don’t.
That’s because cultural and economic values have changed dramatically over the last generations as political and media elites have convinced many Americans that saving is passé. So today, under the influence of Keynesian economists who champion government spending and high levels of consumption, thrift has been devalued.

Keynesian ideas dominate the Obama administration and mass media. Most politicians, including Republicans who often pretend to be friends of thrift and self-improvement, are tacit or overt Keynesians. That’s because politicians, whether they have studied Keynes or not, generally love the idea of cheap money. Most delight in spending taxpayer dollars. They believe this is the way elections are won.

It is the government’s role, Keynes’s followers believe, to keep the boom going through spending. So it is consumption, not supply, that makes a successful economy, they say.

Mainstream media rehashes the message that the consumer, not the producer, is the biggest part of the economy. Politicians agree.

As the economy started to slow down in 2006, President Bush urged Americans to “go shopping more.” Newsweek, in a headline story several years ago, told Americans to “Stop Saving Now.”

Keynesians of all stripes have constantly urged Americans, especially the government, to spend. The effect of this change has been more than numbers. It also changed how many Americans see the path to self-improvement. Joe Sixpack, the average American who once believed that through thrift, hard work and discipline he could save his way to a better life for his family, is the victim. Keynesian economists and mainstream media commentators often depict savers as selfish people.

A former U.S. Commerce Secretary was asked by his Japanese counterpart in the 1970s in Pete Peterson’s book Facing Up, “please explain putting the highest taxes on what you call unearned income. We have always assumed that income from savings was the most earned of all. It is hard work to save, don’t you think?”

Meanwhile, savers are penalized for their thrift. The Fed’s policies mean they receive almost nothing in interest.

Remarkably, President Obama, in the same report, in a move Keynes would have likely applauded, proposes to put a cap on qualified retirement plan balances. Apparently, the president agrees saving is “a negative act.”

Despite the Keynesian sentiments of much of our political and media elites, we owe it to our grandparents to re-learn the lessons of thrift.

edit on 3-10-2013 by greencmp because: (no reason given)

Theoretically it is impossible to waste money.

There are several scenarios in a normal system that isn't fiat and doesn't have a federal reserve(central hub for banking cartel).

-You save your money which means there is now less money in circulation, meaning everyone's money goes up in value.
-You spend your money which of course helps local businesses.
-You invest your money in local businesses to help provide capital for growth

As you see there is no way to "waste" money. Any action, is in theory, just as helpful or not helpful to the economy.

Of course that's not true in the current system because the current system is a scam. In the current system if you save your money the value will eventually be zero because of long term inflation. You have no choice but to place your money in some type of finance vehicle that earns a return.

It's still a lie that spending more helps the economy. This is more backwards thinking by economists that have run the nation into the ground and allowed for banking cartels to take over. It goes against all reasoning that in times of hardship you would spend MORE money. This is more nonsense spouted as a result of the current fiat scam.

It is natural for economies to shrink and grow, for businesses to fail and be born.

OrphanApology
It's still a lie that spending more helps the economy. This is more backwards thinking by economists that have run the nation into the ground and allowed for banking cartels to take over. It goes against all reasoning that in times of hardship you would spend MORE money. This is more nonsense spouted as a result of the current fiat scam.

It is natural for economies to shrink and grow, for businesses to fail and be born.

Yes indeed, I was flabbergasted that Paul Krugman still maintains that not enough monopoly money was dumped into the economy (as stimulus) and that is the reason that the economy is treading water.

I think it is high time we open Schrödinger's bank and look inside.

Savings is what drove the majority of growth over the last 150 years, and is the principle progressive force of capitalism. referred to as "Thrift" the British were avid savers during their industrialization and many countries including the US went through a massive savings spree to get to the wealth they are at today.

It is countries with poor savings habits and histories of poor savings habits that are the poorest countries.

Keynesian is crap. GARBAGE.

reply to post by greencmp


You are so right.
The thing to do is to wean yourself of the reliance on money, and your children if you have any. Teach them self sustenance techniques like Hunting, fishing, foraging, growing, finding or building shelter, Finding clean water or distilling water, or brewing (Beer brewed even with very crappy water kills all the bacteria and makes water drinkable as beer )
Sooner or later the economy will crash it's unsustainable at this point.

There is an old saying which goes..

"Look after the pennies and the pounds look after themselves"

Your question on saving is actually a question about what actually money is and how we use it.

If when you say a penny saved you are talking about an idle penny then nope saving that penny is not a good investment proposition...

If however you mean not spend the penny but invest it somewhere it would not loose it's base value then saving is absolutely the right thing to do...

Peace,

Korg.