We saw this in the last and earl eighties during the age of stagflation and the recession. We certainly saw it in the wake of the financial crisis, when the saving rate quickly rose from a near-low of 3. But if the BEA's numbers are correct, that pattern appears to be over, and Americans appear to be more willing to save even when job growth continues to head upward.
This change could be a result of several factors.
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It could be Americans are less confident about their prospects for future earnings, even if the current job situation appears bright. Many could be less confident that the assets they do have will provide a cushion in case of crisis. For example, many Americans may have learned their lesson about the myth that "housing prices always go up. The fact that these numbers are averages makes it especially hard to guess.
After all, surveys suggests a very large numbers of Americans are saving very little.
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Regardless of who is doing it, however, increased saving can be a good thing for the economy overall. For instance, even if only the rich are the ones saving more, their saving increases the amount of loanable funds, decreasing the interest rate, and making lenders more likely to lend to riskier borrowers. That's good for farmers and small business owners. Moreover, as the wealthy refrain from spending, they increase the value of cash held and spent by people at all income levels.
For example, if the rich are spending less on restaurant meals and pickup trucks, this means the prices for those items are not being bid up as much. When the rich save, that means fewer dollars chasing goods and services, which can lead to more stable, or even falling prices.
That can be good for many people at lower income levels. Nonetheless, many mainstream economists continue to get hung up on the idea that saving "too much" hampers economic growth. This is an old story we've been hearing for years, and the idea that there is too much saving certainly received its share of promotion during the recession, and during the recession. Economists do recognize that more saving helps increase loanable funds — and thus puts downward pressure on interests rates — and reduces inflation. But more saving does not , as they think, reduce real economic growth.
True, it might reduce economic growth as measured by government stats which mostly just add up money transactions.
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But properly understood, economic growth increases with saving, because the capital stock is increasing, making it easier for entrepreneurs to deliver new goods and services — and more goods and services — to consumers. As Frank Shostak explains , we need more saving to create more and better goods:. What limits the production growth of goods and services is the introduction of better tools and machinery i.
Tools and machinery are not readily available; they must be made. In order to make them, people must allocate consumer goods and services that will sustain those individuals engaged in the production of tools and machinery. This allocation of consumer goods and services is what savings is all about. Note that savings become possible once some individuals have agreed to transfer some of their present goods to individuals that are engaged in the production of tools and machinery.
Obviously, they do not transfer these goods for free, but in return for a greater quantity of goods in the future. According to Mises, "Production of goods ready for consumption requires the use of capital goods, that is, of tools and of half-finished material. Capital comes into existence by saving, i. The common view among many economists today, however, is that it's better for economic growth to make sure more people spend every last dime on trinkets at the discount store. Those who have been around long enough to remember previous business cycles will remember that this idea manifests itself during times of recession as pundits insist it's our patriotic duty to spend more , in order to create economic growth.
In truth, in a time like today, the best thing people can do is save more. We live in a time of multiple economic bubbles and non-productive sectors of the economy fueled by inflationary monetary policy. When recession finally does come, vast amounts of debt will never get paid back and immense numbers of "assets" held on balance sheets will evaporate.
The result will be a lot of lost jobs and a lot of failed businesses. The only real cushion will be real savings which will be badly needed in a time of recession. Warren and Sanders et al. Since the rich own far more stock and real estate than the average person, the effect of this rise in prices is that economic inequality appears to increase. Somehow the sharp declines in apparent economic inequality that necessarily accompany market busts, are not reported.
While the rich appear to gain because of the rise in the prices of their assets, in reality they lose. This is because the taxation of their profits on the sale of stocks and real estate prevents the funds accruing to them from keeping pace with the rise in prices. Their funds grow only to the extent of what remains after the payment of taxes. It creates the appearance of business prosperity along with the fact of general impoverishment, which results in blaming poverty on business and profits. One "solution" to inequality — put forth by Elizabeth Warren — is the wealth tax.
This taxing away of capital means less means of production and thus less production and higher prices.
At the same time, it means less demand for labor and thus lower wages. And the same is true of the essentially similar programs of her fellow haters of the rich, such as Bernie Sanders and Ocasio-Cortez. We are happy to announce a new book by Nicolai J. Foss, Peter G. This short volume is a concise introduction to the work that's been done over Foss , Peter G.
This short volume is a concise introduction to the work that's been done over the past few decades applying and extending the ideas of Austrian economics in the management disciplines. The table of contents is as follows:.
Most important, the book is available free of charge until November 18th, so be sure to check it out! The Federal Reserve lowered its benchmark interest rate on Wednesday, cutting the target federal funds rate by 0. The committee's rhetoric around the rate cut The committee's rhetoric around the rate cut was the usual routine. The committee's statement indicated that " labor market remains strong and that economic activity has been rising at a moderate rate. So, there is no information here to suggests why the committee is cutting now versus all the other times the labor market is "strong" and economic strength is "moderate.
Rosengren voted against the measure because he wanted a bigger ate cut. In a recent class on police legitimacy I asked the class to raise their hands if they had ever been stopped by an outside agency for a traffic violation. More than half the room raised their hands.
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I asked them to keep their hands up and then asked, after identifying yourself as a police officer, how many had a bad experience? Very few hands went down. I will ask you the same thing I asked them. If we treat each other like this, how do we treat the public? A few years ago, I, along with the officers I was working with, received a call from a restaurant about a group of teenagers who were throwing chairs and drinks in the business.
As we headed to the area, we received information that the manager was following the teens and we were able to locate them. We came upon a mixed group of males and females ranging in age from and confirmed by the manager that they were our suspects.
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Video confirmed the damage and the group was placed under arrest. Before I would let the officers leave the area, I made them go to the people who were observing this action and explain what we were doing and why. We explained and the public agreed that they did not want that behavior in their neighborhood. Without taking the time to talk to the citizens, they would have filled in the blank with what they surmised instead of the facts. Every call you go on is an opportunity to speak with the public. You should always be a public relations officer. If you go on an alarm call, stop by the neighbors who are out and tell them things check out ok and why you were in the neighborhood.
If you chase a suspect through the neighborhood, take the time afterwards to tell those watching what took place. We do a bad job of telling the public who we are and what we do. We work for them, not them for us. Make the connections by talking to the public, informing them of what is going on in THEIR neighborhoods. In Irondale invited the New York Police Department to join them in developing a community program that would use theatrical improvisation to build communication and empathy between officers and the communities they are charged to protect and serve.
Over a period of ten weeks, seven officers and seven community members come together to eat, talk, and play together. These workshops are recorded by documentary filmmakers from the award winning production company, Press and the Public Project, and used for internal training by the NYPD.
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The raw footage will be available for a documentary film for national distribution. See the series here. For more information contact Executive Director Terry Greiss at Photo by Amanda Hinkle. And by playing together we begin to break down insecurities we may have that come from not understanding.