Friday, July 31, 2015

My letter to the Wall Street Journal re: A strange definition of "good news"

Re: Consumers Prime the U.S. Pump

Dear Sirs:
Your definition of "good news" for the U.S. economy is defined as an increase in "real, or inflation-adjusted, personal-consumption expenditure", which was driven by a "savings rate, which slipped to 4.8% from 5.2%." An economy can expand only from savings; i.e., deferring consumption in order to invest capital resources in productive assets that will provide more goods in the future. Your definition assumes the opposite. Surely, you would not recommend such a policy for individuals: i.e., that one should spend one's savings in order to be more financially secure in the future. And, please, do not resort to the fallacious argument of the "paradox of savings" and/or the "savings glut", which assumes that what is bad for the individual somehow is good for the economy as a whole.

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