Why the Economy May Not Turn Around Soon
I hate to be depressing, but this article by David P. Goldman is eye-opening (and depressing).
Here is the money quote:
"High savings rates are deflationary. Savings postpones consumption. Savers forego consumption of present goods for future goods by purchasing securities rather than current production. That drives down the price of current goods and increase the price of future goods (bonds)."
If Americans start saving more (as I think is necessary for an overall recalibration of our economy), who is going to pick up on the demand side? There is no way this can be quick, its a structural issue we are working through, not merely a cyclical one.
Here is the money quote:
"High savings rates are deflationary. Savings postpones consumption. Savers forego consumption of present goods for future goods by purchasing securities rather than current production. That drives down the price of current goods and increase the price of future goods (bonds)."
If Americans start saving more (as I think is necessary for an overall recalibration of our economy), who is going to pick up on the demand side? There is no way this can be quick, its a structural issue we are working through, not merely a cyclical one.
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