Fed: Americans Are Saving Too Much Money, So We Need Them Spending Again

Discussion in 'Economics' started by bearice, Oct 10, 2010.

  1. Some top Federal Reserve officials have come up with a really bizarre proposal for stimulating the U.S. economy. As unbelievable as it sounds, what they actually propose to do is to purposely raise the rate of inflation so that Americans will stop saving so much money and will start spending wildly again. The idea behind it is that if inflation rises a couple of percentage points, but consumers are only earning half a percent (or less) on their savings accounts, then there will be an incentive for consumers to spend that money as the value of it deteriorates sitting in the bank. Yes, that is how bizarre things have gotten. It is not as if U.S. consumers are even saving that much money. Several decades ago, Americans typically saved between 8 and 12 percent of their incomes, but over this past decade the personal saving rate got down near zero a number of times as Americans were living far beyond their means. Once the recession hit, Americans very wisely started saving more money, and so now the personal saving rate has been hovering around the 5 to 7 percent range. This is well below historical levels, but the folks at the Fed apparently are eager for Americans to pull that money out and start spending it again.

    Complete article-:

  2. Fed can't boost inflation now.
    Sure they can print money like crazy, but who'll take the loans, and in what they will spend the money?

    This brings back to Keynes:
    Who said that central banks can't create consumption by monetery measures.
    Only gov't keynesianism may boost consumption. At least only in depressed economies like now.