No. of Recommendations: 10
dinoczar,
Who would buy the Lexuses? (Lexi? Lexusi?)
Who would buy the $600 shoes?
Who would eat out enough to Panera, Burker King, <insert 5 star restaurant here>?
AND DEAR GOD, WHO WOULD DRINK COFFEE AT STARBUCKS?


I'm not worried about that. Seriously. Unless 'saved' money is stuffed under mattresses, it is still a productive part of the economy. If it gets sent to banks, it helps lower the interest rates that get charged for loans, thereby making expansion easier. If it gets invested directly in companies, it helps the companies expand more cost effectively.

Additionally, nearly universally, the people I've seen who are struggling to make ends meet have credit card debt that carries interest. The interest payments do not represent new consumption, nor the payoff of old consumption (that's the principal repayment part). The interest payments represent the cost of borrowing money for the right to pay "tomorrow" for something consumed "yesterday". I daresay that in the absence of credit card interest payments, many of these folks could actually afford to increase their consumption, while still living within their means. It's one thing to take on a loan to pay for a house you expect to live in and use for years to come. It's another thing to take out a loan to pay for a night on town, and end up with a financial hangover that lasts for years to come.

On the flip side, as people age, the need to save reduces, and the more people have saved up by the time they need to start living off their assets, the more they can comfortably spend. It only make sense that a population of octogenarian millionares would spend more than an equivalent population of octogenarian paupers...

Between the natural redeployment/reinvestment of saved or invested capital, the ability to consume more in the present if not paying for the consumption of the past, and the increased spending allowed by having more money to spend in the future, I don't see the economic meltdown would result from improving savings. If everyone started stuffing cash under their mattress, then I'd see a problem.

-Chuck
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