Revenge of the Glut

The other day I opened my credit card bill and I was surprised by how small it was. I didn’t realize how much I had cut back on consumption. It wasn’t a conscious effort, it just sorta of…happened.
In macroeconomic terms, what I did was a bad thing. By saving, I’m not spending money which would become someone else’s income. Keynes called this as “the paradox of thrift.”
Apparently, I’m not alone. The government reported that the national savings rate bumped up to 5% in January from 3.9% in December. A year ago, it was at 0.1%. Here’s a graphical look.
In yesterday’s column, Paul Krugman said,”we’re suffering from a global paradox of thrift: around the world, desired saving exceeds the amount businesses are willing to invest. And the result is a global slump that leaves everyone worse off.”

Posted by on March 2nd, 2009 at 10:31 am


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