
New threat to the economy: Americans are saving like it's the 1980s - kabisote
https://edition.cnn.com/2020/05/12/investing/jobs-coronavirus-consumer-spending-debt/index.html
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Nasrudith
Even with the macroeconomic effects as valid the mode of thinking is so
painfully backwards and entitled in so many ways.

1\. The job of the producers is to produce what the consumers want, not the
consumers to accept whatever they want to produce! It is not a birthright to
guaranteed profit from whatever they want to produce being sold. That has
never existed. It brings to mind every idiot CEo of a business which failed to
adapt bemoaning "murder by millenials" and wondering why they aren't getting
new customers among those they insulted for products they don't even want in
the first place.

2\. If credit flow is required for the economic velocity it hints at an
insufficient amount of solid currency in the economy and the interest costs
are deterring spending exactly as intended. Even if taken for granted that the
boost is needed doesn't mean that a consumer credit bubble is the best way to
do so.

2a. If saving is not desired behavior retirement must be guaranteed in spite
of lack of it. Asking for changes with no viable alternative is a
fundamentally an unreasonable demand in negotiation. If you don't want a
population explosion as 8 kids is the accessible way to be supported in old
age then provide elder's pensions or stop complaining about population growth.

2b. Even if they could keep on using credit until they die the gains would be
unrealized as the music stops even after they claimed the estate the debt
would be written off. Continually rising consumer debts are a bubble because
they are not immortal conglomerate entities like corporations or governments.

3\. A drop in demand given available means of payment or credit implies a
failure to at the same provide utility and provide a pathway to payment.

Essentially the answer to the economic problem isn't more consumer debt and
pretending this fine but solving the root problems in a profitable way.

~~~
austincheney
> The job of the producers is to produce what the consumers want, not the
> consumers to accept whatever they want to produce!

But that is the current general practice of software, especially online
interconnected software, to force acceptable product preferences to the
consumer without regard for consumer demand or competition. Developers
typically dictate the choice of architecture and framework and then specify
acceptable ranges of performance and design allowed by that framework utterly
without regard for what the user wants or willing to pay for. That is
developers putting their personal technology preferences before the user
concerns or business revenue goals. When you point out the nature of ethics
violation the developers most concerned by those technology preferences get
really emotional, perhaps hostile. I have seen this at every software job I
have held and it’s not limited to any language or class of technologies.

~~~
teilo
No one forces you to buy or use software. How is software different than any
other product? It's engineered a certain way, and offered to customers, who
either buy it or do not.

Companies who develop products without regard for consumer demand or the
competition are eventually unemployed. They may have a defacto monopoly for a
time, but it inevitably ends.

Competition is not only real, but fierce in software, as anyone in corporate
IT management will tell you. Because my damn phone never stops ringing with
hungry software salescritters vying for my attention.

~~~
austincheney
> How is software different than any other product?

Software is unregulated.

> Competition is not only real

You are imagining an unstated opinion. I never claimed competition is absent
from software but that software developers make decisions without regard for
that competition and impose those decisions upon their products without regard
for their users or business revenue.

> Companies who develop products without regard for consumer demand or the
> competition are eventually unemployed.

That sounds like hyperbole. Advertising companies, as an example, do very well
without regard for competition or the end user. Companies will continue so
long as they are cash flow positive.

------
cwhiz
Bitch about people who didn’t save for an emergency expense or for retirement.
Bitch about people who spend frivolously. And now, miraculously, bitch about
people who are saving.

This is not a complex problem. If you want people to spend money you must give
them a proper safety net. That means pensions and health care.

~~~
m463
From talking to others, a lot of people are saving money whether they want to
or not.

People are eating at home, preparing their own food. Nobody is driving and
spending money on gas and tires. No living large with nights out on the town
or big travel plans.

I think lots of folks with their modest indoor activities or dog walking
aren't spending just because, not because it is premeditated.

Though a lot of my friends who are thrifty are complaining about nothing being
on sale anymore.

~~~
RickJWagner
Not where I live. I'm seeing take-out restaurants thrive.

My family usually eats out twice a week (plus a date lunch for wifey and I),
but since corona we've upped it to 3 meals a week to help the restaurants. I
think others might be doing similar things.

I think there'll be a shakeout. Restaurants that serve takeout well will
survive and eventually thrive, those that rely on sit-in will suffer and maybe
close.

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chrisseaton
Wow they criticise you when you spend and now they criticise you when you
save.

~~~
lonelappde
Can't eat money.

[https://en.wikipedia.org/wiki/Paradox_of_thrift](https://en.wikipedia.org/wiki/Paradox_of_thrift)

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stunt
People should save even in a healthy economy. You should always have emergency
fund + additional saving to reach your goals.

Investors do save as well. Much more than average consumers. The difference is
that average consumer doesn’t have enough to buy assets or diversify their
saving as much as investors can do.

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cmurf
Profligate spending has been good for the consumption based economy, and bad
for the vast majority of Americans who lack rainy day savings. Let alone
something more serious.

If self-reliance and personal fiscal responsibility is a "threat to the
economy" then the economy is part of the problem.

~~~
wwweston
We've gotten efficient enough of producing the basics that we don't need
everyone or maybe even half of the available labor market to do it.

That means either a good chunk of people have to be employed doing stuff
driven by unnecessary spending, or they don't have employment. And we aren't
great at distributing necessities to those who don't have employment.

You could say the economy is part of the problem.

Or you could just say demand drives employment, which means when demand for
non-necessities drops, so does employment.

~~~
bobthepanda
Demand doesn't necessarily have to be US demand, though.

For the past few decades US consumer demand has done a lot of heavy lifting
for the global economy. Why can't more of this come from other big markets
like Germany or China?

~~~
411111111111111
The only product the USA produces inside its borders that's actually in demand
globally is culture (movies, tv shows etc).

~~~
tonyedgecombe
and software (Google, Microsoft, Facebook, etc).

~~~
411111111111111
I'd consider them multinational at best. They'll stop targeting USA first as
soon as it's more profitable to do so.

They did start there though, that's for sure!

------
Qasaur
It's only a problem if you subscribe to (in my opinion, the flawed and
incredibly destructive) modern economic theory which is largely a continuation
of the Keynesianism of the mid-20th century. Ask any economist why deflation
is a bad thing and they will generally tell you that it is because they want
to avoid a deflationary spiral with collapsing prices and high unemployment,
which is why they want to ensure that consumers mindlessly consume and ensure
that prices are kept "stable" (in their opinion, stable prices mean a positive
inflation rate of 2%, which in my humble opinion does not make sense in pure
mathematical terms).

However, there are two fundamental and overlooked errors in the assumptions
that underlie this theory:

a) there is an assumption that consumers/agents are homogenous in their
preferences and that people would rather starve to death than give up the
opportunity to spend their money when it is worth more in the future. No sane
person is going to wait one year to wait out some insignificant appreciation
in the value of the money. People will still need to consume food and many of
them would prefer to buy things now than in the future (consumer time
preference, i.e. the desire to want things now rather than later, is _always_
positive). For some inexplicable reason, time preference is completely ignored
in the foundations of the theories that underpin modern monetary policy.

b) the second main assumption is that money saved is money that is
unproductive. This is false: savings lead to investment in the economy as
resources that would otherwise be consumed are redirected into lengthening
production structures in the economy. Put simply, this means that if more
people put money in the bank, the bank will have more money to lend out and
interest rates would fall, allowing entrepreneurs and companies to invest in
production structures which in the long-run will lead to higher quality goods
and cheaper prices.

Of course, in the current highly distorted economy, deflation is disastrous as
companies which are addicted to debt will need to be liquidated as there is no
longer a steady stream of money coming in through inflation. This will likely
lead to a severe recession, but this is not a bad thing as in the long-run the
economy is better off as inefficient businesses who are addicted to debt and
cheap money will no longer be able to operate, and clever entrepreneurs will
be able to take their place.

It is savings that build up capital structures in the economy, not consumption
which largely distorts and even destroys said structures, and the faster we
stop this destructive inflationary monetary policy the faster we return to
sustainable, fair, and _real_ economic growth.

~~~
pintxo
> b) ... this means that if more people put money in the bank, the bank will
> have more money to lend out and interest rates would fall

This is not how lending works for banks in the western world. Banks do not
lend out their customers savings.

Basically banks are legally allowed to create money out of thin air. They are
only limited by their equity in how much money they can create as they have to
reserve a certain amount of equity for each unit of created money.

[https://en.wikipedia.org/wiki/Money_creation#Role_of_banks_i...](https://en.wikipedia.org/wiki/Money_creation#Role_of_banks_in_money_creation)

~~~
ericmay
They don’t lend out their customer’s savings directly per-se but you have to
have deposits in order to have assets to lend against. Otherwise, why wouldn’t
you be able to create a bank out of thin air and loan money? Customers cost
money, why even have them?

I think what you missed in the article you linked is the concept of reserve
requirements. What the person you’re responding to said is actually correct,
again otherwise why wouldn’t a small regional bank be able to lend the same
amount of money as JPMorgan Chase? The more deposits you have, the more you
can lend.

~~~
pintxo
Lending is tight to a banks equity. Prior to Basel II (early 2000s) this was
some 8% per loan. So the more equity you have, the more loans you can provide.
As small regional banks are unlikely to have the same amount of equity than
JPMorgan Chase, they cannot provide the same amount of loans.

Under the followup regime (Basel III) its:
[https://en.wikipedia.org/wiki/Basel_III#Leverage_ratio](https://en.wikipedia.org/wiki/Basel_III#Leverage_ratio)

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jacob9706
"Average people are saving enough for an emergency." Am I missing something
here?

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digitaltrees
On balance this is a good thing but any trend taken too far is a problem.

That being said the time to safe is when the economy is good not in the heart
of a crisis. It’s sad that human cognition is so short sided and blind to long
term risk. It’s sad that 20 year olds ignore retirement and lose compound
interest and then scramble to save in their 50s.

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conductr
As bad as it is, I feel like this is our chance to do some large scale norm
changes. Eg. Shorter standard work week, more time off. No as some
liberal/socialist agenda but as a way to reach full employment again. I don’t
think we’re ready for basic income, but whatever the right stepping stone is,
I think govt has a big enough reason to address it now.

Edit: our/we = US, habit and context of article

~~~
bobthepanda
Another thing is to stop tying healthcare to employment via tax benefits for
employers.

So many people are stuck in less than ideal jobs because the employer-provided
healthcare system is nuts. On top of that many of these plans aren't even that
great any more.

~~~
fxj
It seems that giving free healthcare, a free place to live, enough food and
internet to everyone would be a good idea to stimulate the economy. Jobs would
be generated by themselves if people then want a higher standard of living but
no longer have to fight to survive.

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renewiltord
So stim everyone again. That's just a tax on the entire population that will
give the poorest some spending power. Stim everyone really hard. Consumer-
level QE, HM, whatever. Apply stim to forehead.

