kblair7

No. Keynes did.

I personally think that only major capitol holders can effect circulation, and therefore aggregate demand. However, if enough people fail to move capitol then it can have a ripple effect.

kblair7

How? You fail to go into any detail. Why don't you explain to me?

DanS.

hmmm....maybe. I'm not sure what the distribution for income is for the bottom 80% of earners are....but I'm pretty sure the propensity to consume is in the high 90's....It could be huge I suppose if the savings went from a couple percentage points to say 15%.

kblair7

To be honest there is not way to prove it. Which is why it is really just a theory. I doubt their is a model with the scale to calculate all relevant variables, but who knows.

I do however think that consumer behavior is a good indication of what is AVERAGE among the public. A majority of consumers are indebt, so what can be inferred is people tend to spend more than they save. That's just a anecdotal example, since its far more complicated, but I think it gets the point across. Measuring behavior across a broad scale, is a somewhat reliable indicator of how much, where, and when, Americans tend to consume.

Absolutely, savings increasing could have a very positive effect on standard of living. I would encourage people to save and invest. When I made that statement I was really referring to "depression" more than "recession." That in a depression it is common behavior to "horde" one's money. That people will develop a fundamental distrust of the monetary establishment. When capitol fails to circulate, it can have some influence on overall aggregate demand.

Richterscale

You only WISH that savings were at 2%. Here's a couple handy-dandy charts to ilustrate our move towards economic wipeout.

Both charts are PERSONAL SAVINGS AS A PERCENTAGE OF DISPOSABLE INCOME





You can't save what you don't have.

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