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In Case You Missed It: The Paradox of Thrift

Editor's Note: On last night's NewsHour, Paul examined the paradox of thrift. Here's MIT's Simon Johnson explaining the phenomenon in the segment:

SIMON JOHNSON, MIT Sloan School of Management: Paradox of thrift is the idea that you try -- everyone tries to increase their savings, so desired savings goes up, thrift being savings, but the act of trying to save pulls down the entire economy, gives you a big recession or maybe even a depression, and total savings don't go up. Maybe they even go down. So everyone trying to save leads to a big slowdown and less savings. That's a paradox.

-- Posted April 16, 2009 | Comments (2) | Permalink

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2 Comments

Reese T. said:

The thrift industry as well as sales in malls is a great way for our consumer to maximize the value of their money. However, some says that saving could worsen the financial crisis. Buying bulk is always a good idea, as you can stock up for quite some time and save a lot of green over the long run. Keeping a keen eye on what is going for cheap in your area grocery stores can save you a lot of money if you keep to it. You can keep from wondering about installment loans to keep the shelves stocked by clipping coupons.


 
Greg Tibbits said:

Ignorance is strength, freedom is slavery, war is peace, and more savings is less savings. Sure. The idea that the more anyone saves (a penny saved is a penny earned) the more likely those savings will be spent eventually upon the necessities of life, food, shelter, clothing and fuel, rather than conspicuous consumption goods and services, bringing down those economic products price, escapes the modern economist, enslaved by the theory that the more monetary wealth that flows upward the better for all. Modern economists, including "experts' on TV, the universities, and working for the government, are just employees of rich people and corporations, in support of fascistic tyranny.


 

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