Vigilant Investor

Consumption Based Policies Drives Savings to Depression-era Lows

Mainstream thought on economics — from Wall Street, to the Fed, and to Washington D.C. — seems to hold the belief that consumption is the best thing for the economy. From that, some even believe that government deficits are good for savings — suggesting that without government, nobody would save (if you can imagine?!?).

Robert Murphy at the Mises site takes that line of thinking to task by pointing out the clear folly of such arguments, but it appears as if that line of solid reasoning has fallen on deaf ears for far, far to long. Of course, we’ve long been pointing out that absent savings, you can’t expect to have recovery.

For what its worth, at least some folks are taking note at the AP. Martin Crutsinger has documented that the U.S. savings rate is the lowest its been since The Great Depression.

That can’t be good. But not if you believe pop-economists. They keep saying, the more we spend, the better it is for the economy.

Ok. There’s not much we can do about that. But there is stuff you could be doing with your portfolio to counter the possible ill side-effects so such obviously flawed thinking. And that starts by learning as much as you can about what the herd is missing.

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