Consumption doesnt help economy, savings do!
Now the trend in the world is to cut taxes and put more money in the hands of the consumer. Then they are encouraging the citizens to spend more, to buy more, to consume more, to help the other guy, to help stimulate the economy. Here are news items from Australia and Canada on this. The Australian prime minister is saying "Go out and spend the money"!
This is nonsense. Just like consumption by me doesn't help my financial situation, I will be poorer if I consume today, so it goes for the whole society or country. Consumption doesn't help; I need to find productive uses of my capital, so I produce more. For example, if for $1000 which the Government gives me in Tax rebates, if I go and buy a plastic dinosaur, that hardly helps in me producing more bread (I am a baker by profession). However, if that $1000 goes towards buying a new storage box for the bread, I can produce more bread. More importantly, if I hold on to the $1000 in the bank and do nothing at all; my efficiency of making bread doesn't go down.
Consumption is not necessary to increase production or productivity. That is the mistake Keynes made, and everyone seems to not understand this simple thing. Division of labor, increase in efficiency and dexterity of workers, increase without any consumption. In fact, when people are less likely to buy and consume your products, you work harder to lower the costs of the goods so they do buy them.
A prosperous society is a society which consumes nothing but produces everything in large kquantities. Think of Uber robots who dont even need energy to run---they keep producing bread, steel, jewelery, houses, cars, airplanes, etc. in extremely large quantities at 0 cost. That is a rich society. Whenever you consume something, you take away from this ideal rich society.
Just as a man who doesn't spend anything at all, I mean 0, from his salary assures that he will be rich; so does a society or country which spends nothing assures that it will be rich.
So next time someone talks to you about stimulating the economy, providing jobs for the country, etc. by increasing consumption, you need to run away from them!
Sanjay
This is nonsense. Just like consumption by me doesn't help my financial situation, I will be poorer if I consume today, so it goes for the whole society or country. Consumption doesn't help; I need to find productive uses of my capital, so I produce more. For example, if for $1000 which the Government gives me in Tax rebates, if I go and buy a plastic dinosaur, that hardly helps in me producing more bread (I am a baker by profession). However, if that $1000 goes towards buying a new storage box for the bread, I can produce more bread. More importantly, if I hold on to the $1000 in the bank and do nothing at all; my efficiency of making bread doesn't go down.
Consumption is not necessary to increase production or productivity. That is the mistake Keynes made, and everyone seems to not understand this simple thing. Division of labor, increase in efficiency and dexterity of workers, increase without any consumption. In fact, when people are less likely to buy and consume your products, you work harder to lower the costs of the goods so they do buy them.
A prosperous society is a society which consumes nothing but produces everything in large kquantities. Think of Uber robots who dont even need energy to run---they keep producing bread, steel, jewelery, houses, cars, airplanes, etc. in extremely large quantities at 0 cost. That is a rich society. Whenever you consume something, you take away from this ideal rich society.
Just as a man who doesn't spend anything at all, I mean 0, from his salary assures that he will be rich; so does a society or country which spends nothing assures that it will be rich.
So next time someone talks to you about stimulating the economy, providing jobs for the country, etc. by increasing consumption, you need to run away from them!
Sanjay
Labels: general commentary
posted by Sanjay "John" Gandhi at 7:32 AM
3 Comments:
Here's what International Monetary Fund's chief economist Simon Johnson said today: "Everyone wants to save and no one wants to spend. That makes it very hard to get growth,"...
See the full story here.
another bozo falling for the "more spending leads to riches" idea. And this is the chief economist-have these guys never every done a business in their lives???
This ridiculous idea of spending yoru way to riches needs to stop before these guys ruin more grad student lives by their phoney economics and finance ideas!
Sanjay
Here's another bum, the Chinese Central Bank Governor Zhou Xiaochuan, trying to boost the Chinese economy by reducing savings and increasing consumption! These central bank dumb fxxxs have never run a real business in their lives, have been given PhD's in a discipline full or errors-Economics. The only man who knew what he was talking about in Economics was Adam Smith, and all others are capturing maybe 1% of what he said, and distorting and misinterpreting 99% of the rest.
Here's what Smith said about parsimony (savings) vs. consumption (prodigality):
"Capitals are increased by parsimony, and diminished by prodigality and misconduct.
Whatever a person saves from his revenue he adds to his capital, and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest, that is, for a share of the profits. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains, so the capital of a society, which is the same with that of all the individuals who compose it, can be increased only in the same manner."
You can read more of this in the chapter on Accumulation of Stock on Adam Smith Foundation's free access to the Wealth of Nations here.
Sanjay
The bloomberg story of what bum Zhou Xiaochuan said is here.
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