Comments on: Debunking The Paradox of Thrift: Why Consumer Spending Won’t Save Our Economy http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html Investment Advice and Investment Research with a Contrarian Point of View Thu, 09 Feb 2012 16:06:49 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Paradox of Thrift, the Deficit Debate and Virtue Ethics « Meta-economics http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-66904 Paradox of Thrift, the Deficit Debate and Virtue Ethics « Meta-economics Fri, 27 Aug 2010 02:03:57 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-66904 [...] there are those anti-Keynesians of various stripes, including followers of the Austrian school, who believe that Keynesianism and its acknowledgement of the paradox are essentially incitement to [...] [...] there are those anti-Keynesians of various stripes, including followers of the Austrian school, who believe that Keynesianism and its acknowledgement of the paradox are essentially incitement to [...]

]]> By: We’re Squeezing the “Recovery” for Every Penny | Proinvests.com http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-26892 We’re Squeezing the “Recovery” for Every Penny | Proinvests.com Thu, 15 Oct 2009 16:19:52 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-26892 [...] debate over the economy between reknowned economist Mark Skousen and our very own David Fessler. Debunking the Paradox of Thrift spawned incredible feedback. And now Mark and Dave are hitting the airwaves to continue the [...] [...] debate over the economy between reknowned economist Mark Skousen and our very own David Fessler. Debunking the Paradox of Thrift spawned incredible feedback. And now Mark and Dave are hitting the airwaves to continue the [...]

]]> By: Richard Ferry http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-25623 Richard Ferry Tue, 29 Sep 2009 12:21:03 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-25623 I think a major issue now is demand vs debt. Many consumers are afraid to spend and cannot afford to borrow. Everone (people,business,and government) bought into the concept that growth will pay for debt. Debt was how you got ahead. The powers that be will inflate the economy untill some people have equity again. If your smart enough to get ahead the government will reward you with high taxes at every level. I think a major issue now is demand vs debt. Many consumers are afraid to spend and cannot afford to borrow. Everone (people,business,and government) bought into the concept that growth will pay for debt. Debt was how you got ahead. The powers that be will inflate the economy untill some people have equity again. If your smart enough to get ahead the government will reward you with high taxes at every level.

]]> By: Carl W. Hays http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-25391 Carl W. Hays Sat, 26 Sep 2009 20:48:56 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-25391 Once again Fessler shows he does not know what he is talking about. If he says "buy," I avoid or sell immediately. Any success he has is pure luck! Once again Fessler shows he does not know what he is talking about. If he says “buy,” I avoid or sell immediately. Any success he has is pure luck!

]]> By: Terry Leigh http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-25191 Terry Leigh Thu, 24 Sep 2009 19:55:11 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-25191 As a earlier comment said " interesting debate about chicken and the egg". The economy is a complex dynamic system that is heavily influenced by confidence of the consumer(also workers and management) and business ( also consumers). I am increasingly of the belief that traditional economic theory often fails us when we need it most, because it gives no weight to psychological factors. It seems to me that sudden changes in " crowd psychology" result in "black swan" events. I don't know we have a model that will accurately explain the impact of a sudden increase in savings in US society, but given that we have been there in the past; I am not convinced it will be bad for the economy; you can bet that it will be different. As a earlier comment said ” interesting debate about chicken and the egg”. The economy is a complex dynamic system that is heavily influenced by confidence of the consumer(also workers and management) and business ( also consumers). I am increasingly of the belief that traditional economic theory often fails us when we need it most, because it gives no weight to psychological factors. It seems to me that sudden changes in ” crowd psychology” result in “black swan” events. I don’t know we have a model that will accurately explain the impact of a sudden increase in savings in US society, but given that we have been there in the past; I am not convinced it will be bad for the economy; you can bet that it will be different.

]]> By: John Leckrone http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-25148 John Leckrone Thu, 24 Sep 2009 12:34:25 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-25148 I will have to agree with Dave. Supply has never nor will it ever drive demand. As an owner of a retail establishment suffering from a drop in sales due to consumer thrift I can assure you I have plenty of inventory available for sale. I will not replace the inventory unless I sell that which is currently in stock. Simple supply and demand issues control my decisions of what inventory to buy and how I should invest in my business. I will never follow the losing philosophy of "If you build it they will buy it". It did not work in Russia and it sure won't work here in the Socialist States of America. With regards to consumer spending being 70% of the economy that is also true. We have sent almost all of our manufacturing jobs overseas. Manufacturing used to be a much bigger piece of the domestic economy than it is now. We became a very rich nation because of manufacturing. We started becoming poorer when we closed down our factories and sent our jobs overseas due to "cheap" energy and labor. Manufacturing jobs generally pay better than customer service jobs so we went from being nation that used to lend to others to a nation that now is the biggest debtor in this planets history. We have now given that wealth and production ability to the Chinese. They are now the lender and we are the debtor. We put the chains of slavery upon ourselves. Unless government overspending is stopped ALL of the money saved by consumer thrift will be squandered by the politicians in Washington buying votes and pandering to the special interests. As a nation we are in very big trouble and realistically I see no way of ever getting out of it. We have already put this nation into debt to a level that cannot be sustained. Our debt is to the point where we have a very tough time paying just the interest (at rates of less than 1%). Should interest rates rise as I expect them too the future looks even worse. Paying off the principle? What a joke. Everyone knows it will NEVER happen. This is why the U.S. dollar is headed for the scrap heap. The Asian's are buying fewer dollar denominated paper assets while at the same time buying up TANGIBLE assets such as commodities. Even if we sent every single penny we earned to the pirates in Washington we could not do it. Rising interest rates and inflation will be the next thing to destroy this nations already critical budget deficit. God help us. I will have to agree with Dave. Supply has never nor will it ever drive demand. As an owner of a retail establishment suffering from a drop in sales due to consumer thrift I can assure you I have plenty of inventory available for sale. I will not replace the inventory unless I sell that which is currently in stock. Simple supply and demand issues control my decisions of what inventory to buy and how I should invest in my business. I will never follow the losing philosophy of “If you build it they will buy it”. It did not work in Russia and it sure won’t work here in the Socialist States of America.

With regards to consumer spending being 70% of the economy that is also true. We have sent almost all of our manufacturing jobs overseas. Manufacturing used to be a much bigger piece of the domestic economy than it is now. We became a very rich nation because of manufacturing.

We started becoming poorer when we closed down our factories and sent our jobs overseas due to “cheap” energy and labor. Manufacturing jobs generally pay better than customer service jobs so we went from being nation that used to lend to others to a nation that now is the biggest debtor in this planets history. We have now given that wealth and production ability to the Chinese. They are now the lender and we are the debtor. We put the chains of slavery upon ourselves.

Unless government overspending is stopped ALL of the money saved by consumer thrift will be squandered by the politicians in Washington buying votes and pandering to the special interests.

As a nation we are in very big trouble and realistically I see no way of ever getting out of it. We have already put this nation into debt to a level that cannot be sustained. Our debt is to the point where we have a very tough time paying just the interest (at rates of less than 1%). Should interest rates rise as I expect them too the future looks even worse.

Paying off the principle? What a joke. Everyone knows it will NEVER happen. This is why the U.S. dollar is headed for the scrap heap. The Asian’s are buying fewer dollar denominated paper assets while at the same time buying up TANGIBLE assets such as commodities. Even if we sent every single penny we earned to the pirates in Washington we could not do it. Rising interest rates and inflation will be the next thing to destroy this nations already critical budget deficit. God help us.

]]> By: zen kowalewycz http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-25053 zen kowalewycz Wed, 23 Sep 2009 23:38:31 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-25053 Both gentlemen put forward compelling arguments and in my view both are not wrong. I think you should get a third point of view,I believe both arguments are correct but neither one by it self would solve the countries problems. Kind Regards Zen. Both gentlemen put forward compelling arguments and in my view both are not wrong.
I think you should get a third point of view,I believe both arguments are correct but neither one by it self would solve the countries problems.

Kind Regards Zen.

]]> By: David Fessler http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-25052 David Fessler Wed, 23 Sep 2009 23:32:50 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-25052 I love a good debate... The real problem is that this time I think things truly are different. Previous recessions didn't start out with the consumer up to his eyeballs in debt. That why Mark's thesis that supply will drive demand falls apart THIS time. Demand only comes if the consumer has something to spend to drive it. Now eventually his "stuff" will wear out, and he'll need to buy new. But it isn't going to happen in the next 6 months. It may take a year or more. He's hunkering down, fixing things instead of buying new. The painting business is booming. My sister-in-law is a house painter. She can't keep up with the demand, and brought on a partner. When I asked her about this, she said everyone is fixing up instead of moving. Just one example. A friend of mine is a VP at DHL. Nearly 80% of the "stuff" sold at retail - other than food - passes through warehouses of his customers. This month these warehouses should be filling up in anticipation of selling into the holiday season. Most of them are empty. DHL just had a huge layoff. None of the retailers are importing anything close to what they brought in last year. So I know what happened before, but I think this time it's different. We're in uncharted waters, I believe. I love a good debate… The real problem is that this time I think things truly are different. Previous recessions didn’t start out with the consumer up to his eyeballs in debt. That why Mark’s thesis that supply will drive demand falls apart THIS time.

Demand only comes if the consumer has something to spend to drive it. Now eventually his “stuff” will wear out, and he’ll need to buy new. But it isn’t going to happen in the next 6 months. It may take a year or more. He’s hunkering down, fixing things instead of buying new.

The painting business is booming. My sister-in-law is a house painter. She can’t keep up with the demand, and brought on a partner. When I asked her about this, she said everyone is fixing up instead of moving. Just one example.

A friend of mine is a VP at DHL. Nearly 80% of the “stuff” sold at retail – other than food – passes through warehouses of his customers. This month these warehouses should be filling up in anticipation of selling into the holiday season. Most of them are empty. DHL just had a huge layoff. None of the retailers are importing anything close to what they brought in last year.

So I know what happened before, but I think this time it’s different. We’re in uncharted waters, I believe.

]]> By: David J Jogerst http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-25047 David J Jogerst Wed, 23 Sep 2009 22:41:10 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-25047 Both Mark and Dave are one-half right which also make them one-half wrong. Consumer savings generate demand for goods which stimulsates the producers. Also producers need to "produce" and will do so to maintain a viable business. Advertising and reduced prices of necessity will generate the demand from the consumers. Ever hear of the argument about which came first--The chicken or the egg? Both Mark and Dave are one-half right which also make them one-half wrong. Consumer savings generate demand for goods which stimulsates the producers. Also producers need to “produce” and will do so to maintain a viable business. Advertising and reduced prices of necessity will generate the demand from the consumers. Ever hear of the argument about which came first–The chicken or the egg?

]]> By: Ants Viirlaid http://www.investmentu.com/2009/September/debunking-the-paradox-of-thrift.html#comment-25029 Ants Viirlaid Wed, 23 Sep 2009 20:34:25 +0000 http://www.investmentu.com/IUEL/2009/September/debunking-the-paradox-of-thrift-why-consumer-spending-wont-save-our-economy.html#comment-25029 "Buying at Walmart" is not a total negative, I agree. But I also agree with the first sentiment. Namely if we only consume other nations' production --- even though some part of our own retail sector thrives for a while as a result --- how long can we keep it up? It's not sustainable on its own. In the long run we can only consume the equivalent of what we produce. Trade has to be balanced over the long run, otherwise we are just "Selling America's wealth" as Warren Buffett might say. In other words. Squanderville is just liquidating its capital http://www.freerepublic.com/focus/news/1053684/posts So while it may help Walmart and its employees, if our Economic System is so heavily skewed to pure consumption, with so little production to finance that consumption, we are 'skrewed'. “Buying at Walmart” is not a total negative, I agree.

But I also agree with the first sentiment. Namely if we only consume other nations’ production — even though some part of our own retail sector thrives for a while as a result — how long can we keep it up? It’s not sustainable on its own.

In the long run we can only consume the equivalent of what we produce. Trade has to be balanced over the long run, otherwise we are just “Selling America’s wealth” as Warren Buffett might say. In other words. Squanderville is just liquidating its capital
http://www.freerepublic.com/focus/news/1053684/posts

So while it may help Walmart and its employees, if our Economic System is so heavily skewed to pure consumption, with so little production to finance that consumption, we are ‘skrewed’.

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