4/29/09 – The first 100 days
This discussion has nothing to do with the first 100 days of the Obama administration. It’s purely a coincidence that I ponder paradoxes on this date. And, of course, it is coincidence that this date is so close to May Day. But, I digress.
The Paradox of Thrift -- Keynes
Lumps on money tend to be saved. Parceled out, it might be spent by the unwashed masses. Keynesian theory is that spending stimulates that economy. However, it is savings and investment that sustains the economy and is the foundation for growth.
(Note: Keynes didn’t differentiate between rich or poor as long as the stimulus gets spent
A Paradox of Virtue - Dan Henniger, WSJ 2/19/09
- Frugality and prudence are being suppressed. Spending that got us into this mess is now a necessity.
- Does the economy need Thorstein Veblen’s “Conspicuous Consumption”?
- Is saving is a vice?
The Protestant Ethic – Max Weber
The Protestant ethic of hard work and saving is not really a paradox, until it is taken in the context of the current financial crisis and how it has seemed to have disappeared from the American culture.
Alan Greenspan’s term “Irrational Exuberance” can be and has been used almost anywhere. In this case it is the Irrational Exuberance of consumer spending (“The hair of the dog” WSJ 2/19/09) that got us into this financial crisis and now the Stimulus package that is asking for more spending to rebound the economy. Where is the savings?
I think the economy is too smart to put any cash into the mattress. However, it might go into investment that creates real and sustainable jobs and not end up in direct spending. Would the stimulus pass the smell test of speculation without consequences?
There has been a missed opportunity to educate a full generation about economics in general and the ethic of saving in particular. And, I should add more than a generation about energy.
Just as one cannot drink himself sober, the credit crisis cannot be solved with more debt. Credit must be available for the normal financing of business, but unsecured consumer debt available with now consideration for the ability to repay is an addiction.
PennEnergy Microblogs are designed to provide visitors with a handful of rich, closely-related, point-in-time energy insights by a single blogger. The purpose of PennEnergy microblogs is to initiate a conversation with readers about contemporary issues in the Energy industry. Microblogs are perfect for contributors who do not want to be tied down to a weekly blogging schedule, but who have solid, noncommercial, multi-installment content to offer.