The New York Times has an article today that acknowledges people are saving more in this downturn, but also declares that this could be a problem (channeling Paul Krugman and his hoary “paradox of thrift” nonsense):
This shift back to thrift may seem to be a healthy change for a consumer class known for spending more than it earns, but there is a downside: American businesses have become so dependent on consumer spending that any pullback sends ripples through the economy.
Sustained increases in household saving would cause a difficult period of restructuring for the American economy, which has become increasingly driven by consumer spending. Such spending makes up about 70 percent of the nation’s gross domestic product.
Add the decline in consumer spending to the planned expiration of government stimulus spending, and a painful readjustment in demand for goods and services could occur, economists say. The effect would be felt here and abroad, as many developing economies also depend on America’s big-spending ways.
Unfortunately, when the “elites” of journalism don’t even know the basics of economics, we get nonsense like this. Now, I admit that much of the article has good things to say about savers, but because Keynesian hogwash so dominates the thinking of the journalistic and political (and academic) elites, it is hard for these folks to make any sense of saving money.6:54 am on May 10, 2009 Email Bill Anderson