In my last post, I touched on the differences between the economic theories of John Maynard Keynes and Ludwig von Mises. Immediately aftward, I was directed to this story in the New York Times. It seems that americans are saving more instead of spending the their money on consumer goods. Up until this downturn, about 70% of the US Economy was consumer spending, and in 2005, the US Savings rate was negative 2.7%.
The "stimulus" is supposed to stimulate spending to get money moving again. But it isn't happening as planned. Folks are saving for down payments because they don't expect to get zero down home mortgages; they're saving to replenish their decimated retirement and college funds.
The austrians believe that the best way to "fix" the economy is to allow the "malinvestment" created by the false signals in the economy (from the open market ops and deficit spending) to be liquidated and the resources repurposed into better investments. It's beginning to look like this may very well happen despite the stimulus. Wouldn't that be sad?
The question that arises in my mind when I read this article is whether any amount of "stimulus" can create conditions where the level of consumption occuring at a minus 2.7% savings rate (consuming more than we earn or produce) can be sustained for any length of time.
The "stimulus" is supposed to stimulate spending to get money moving again. But it isn't happening as planned. Folks are saving for down payments because they don't expect to get zero down home mortgages; they're saving to replenish their decimated retirement and college funds.
The austrians believe that the best way to "fix" the economy is to allow the "malinvestment" created by the false signals in the economy (from the open market ops and deficit spending) to be liquidated and the resources repurposed into better investments. It's beginning to look like this may very well happen despite the stimulus. Wouldn't that be sad?
The question that arises in my mind when I read this article is whether any amount of "stimulus" can create conditions where the level of consumption occuring at a minus 2.7% savings rate (consuming more than we earn or produce) can be sustained for any length of time.
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