Thrift Has Nothing To Do With It

And real Keynesians are not advocates of mindless consumer spending. Our real long term problems in this country come from a lack of savings and investment. Seduced by delusions and bubbles we have neglected to provide for our future and have instead become the world's financial suckers. They gave us payday loans and we used them to buy junk that we do not need or really want.

Check out the graph of our savings for the past 30 or so years:

As a society we are highly leveraged - that would be up to our ears in debt in the common parlance.

We need to stop. Now. Note to David Brooks no elaborate psychological theory is needed to explain our reaction. Use your social psychology to explain the past eight years.

Unfortunately our demand for stuff was also the engine of economic growth for the rest of the world and the only thing that kept our own economy going at our recent substandard levels of performance. What to do?

We want to save. We would like to set more of our current income aside so that we can use it later. But our income is nothing more than our share of national output and, when we set it aside, we are demanding less national output than we have just produced. Our employers cut back on output and lay us off. Our attempts to save make us worse off.

But savings would not make us worse off if someone decided to use our savings to build factories or get more education or develop and market new energy efficient products and services. Investment would sustain demand. We could save and keep our jobs at the same time. If the projects paid off in improved productivity and a more livable world then we would be better off.

Our problem is that the finance guys, the guys who are supposed to find investors for our savings, don't like any of the opportunities that they see out there. They don't think that the returns are high enough and they see too much risk.

They are still glad to hold our savings and likely charge us for the privilege. They will be happy to unload bad investments on the government - but please don't restrict their paychecks. Right now though they can't really use our thrift because they are too caught up in their own greed and fear.

Psychoanalyze that Mr. Brooks.


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