Dr. Housing Bubble 01/30/09

[Crewleader]

The Paradox of Thrift:
Credit Cards, American Express, Home Equity Loans, Debt,
and Spending our way into the Curious Case of Being Broke.

The paradox of thrift isn’t a new idea although many are floating it out in the economic community as if it was some new mighty revelation. The paradox of thrift (or saving) is an idea discussed by John Maynard Keynes that in recessions, if everyone decides to save this will help contract aggregate demand thus hurting the overall economic growth of a country. However, in recent times most of our GDP growth has been contingent on consumption particularly in housing, cars, vacations, and foreign goods all being financed by debt. In fact, our society saved nothing and spent everything! Talk about the paradox of thrift dilemma taken to the extreme.

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