Comments on: Let’s All Save More, But Not All at Once http://taxesandbudget-blog.ncpa.org/let%e2%80%99s-all-save-more-but-not-all-at-once/ Insights on Taxes, Economic Policy, Federal Budget | NCPA Tue, 16 Mar 2010 17:24:04 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Don the libertarian Democrat http://taxesandbudget-blog.ncpa.org/let%e2%80%99s-all-save-more-but-not-all-at-once/comment-page-1/#comment-7266 Don the libertarian Democrat Thu, 13 Nov 2008 02:29:34 +0000 http://www.bob-mcteer-blog.com/?p=185#comment-7266 "Second, and perhaps more important, "savings" represent loanable funds; an increase in the supply of loanable funds tends to lower interest rates and stimulate borrowing, so a decline in consumable goods with a short time horizon is offset by an increase in production in sectors with longer time horizons. For example, the demand for personal electronics might decline, but the demand for such things as real estate would be stimulated by favorable borrowing conditions." I was going to write this, but Wikipedia says it better than I would have. During a recession, one can pass laws to increase long term investment and infrastructure spending, using tax breaks or government investment. As well, use loans and spending to help people start businesses. I actually started a business during a recession as I recall. I got a great deal on my rent at the time. By giving benefits to people who aren't able to spend, with targeted tax cuts and investment, saving can be a good thing at all times. Of course, as a follower of Maimonides, moderation in most things is the wise course. The Paradox of Thrift seems more a problem of group versus individual behavior, which can be overcome with countervailing incentives for individuals. “Second, and perhaps more important, “savings” represent loanable funds; an increase in the supply of loanable funds tends to lower interest rates and stimulate borrowing, so a decline in consumable goods with a short time horizon is offset by an increase in production in sectors with longer time horizons. For example, the demand for personal electronics might decline, but the demand for such things as real estate would be stimulated by favorable borrowing conditions.”

I was going to write this, but Wikipedia says it better than I would have. During a recession, one can pass laws to increase long term investment and infrastructure spending, using tax breaks or government investment.

As well, use loans and spending to help people start businesses. I actually started a business during a recession as I recall. I got a great deal on my rent at the time.

By giving benefits to people who aren’t able to spend, with targeted tax cuts and investment, saving can be a good thing at all times. Of course, as a follower of Maimonides, moderation in most things is the wise course.

The Paradox of Thrift seems more a problem of group versus individual behavior, which can be overcome with countervailing incentives for individuals.

]]> By: Homer H. HIllis, Jr. http://taxesandbudget-blog.ncpa.org/let%e2%80%99s-all-save-more-but-not-all-at-once/comment-page-1/#comment-7260 Homer H. HIllis, Jr. Wed, 12 Nov 2008 21:10:09 +0000 http://www.bob-mcteer-blog.com/?p=185#comment-7260 Bob, I'm downstream in consumer spending, we sell craft supplies for people to hand make items, we are seeing an awakening of people doing this...I've said people are more resourceful when they have to be and they start making things, we grew well in the early 90s. I import a lot from China and the factory closings are a daily happening. I was surprised to learn that China rebates 13% back to the exporter, India does the same, maybe more. Talk about Moral Hazard! The Chinese are willing to ship goods on consignment to many USA retailers. Last tradeshow in China was slow,and prices dropped on many commodities. Deflation seems to be happening at an alarming rate. I enjoy your comments and I think I met you one time here in Abilene at Hardin Simmons University, Homer H Bob, I’m downstream in consumer spending, we sell craft supplies for people to hand make items, we are seeing an awakening of people doing this…I’ve said people are more resourceful when they have to be and they start making things, we grew well in the early 90s. I import a lot from China and the factory closings are a daily happening. I was surprised to learn that China rebates 13% back to the exporter, India does the same, maybe more. Talk about Moral Hazard! The Chinese are willing to ship goods on consignment to many USA retailers.
Last tradeshow in China was slow,and prices dropped on many commodities.
Deflation seems to be happening at an alarming rate.
I enjoy your comments and I think I met you one time here in Abilene at Hardin Simmons University,
Homer H

]]> By: William Locke http://taxesandbudget-blog.ncpa.org/let%e2%80%99s-all-save-more-but-not-all-at-once/comment-page-1/#comment-7259 William Locke Wed, 12 Nov 2008 16:35:17 +0000 http://www.bob-mcteer-blog.com/?p=185#comment-7259 Hi Bob, Excellent points, as usual. I would add one thing: for years, the US consumer has been actually spending more than their disposable income -- via credit cards (which then were often moved to longer-dated payoff schedules because of re-financings, home equity lines, etc.). US consumers are also in a phase of de-levering, which means not only saving more, but also spending less to pay off credit card balances. I believe that until consumers feel better about their own balance sheets, the slowdown in spending will persist. Bill Locke Hi Bob,

Excellent points, as usual. I would add one thing: for years, the US consumer has been actually spending more than their disposable income — via credit cards (which then were often moved to longer-dated payoff schedules because of re-financings, home equity lines, etc.). US consumers are also in a phase of de-levering, which means not only saving more, but also spending less to pay off credit card balances. I believe that until consumers feel better about their own balance sheets, the slowdown in spending will persist.

Bill Locke

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