Author Topic: If everybody became frugal  (Read 16562 times)

student mustachian

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If everybody became frugal
« on: May 28, 2015, 01:04:36 PM »
I've been thinking about this topic for a while.
I'm not an economist but the idea that everybody would consume less, and produce less (work less hours) and be happier by doing it, seems sensible. But my brother (who is studying echonomics) tells me that if a lot of people start to hoard money and stop spending it, there would be deflation (prices would go down) and that is bad (???). This seems to have happened in Japan.
However, I think there must be a fault in the logic. I think that the reason that the Japanese economy is stagnating, is because people save the money under the mattress instead of investing it (at least that's what I understood).
Also, another question I haven't found a good answer to, is:
Does the economy have to grow?
It seems catastrophic when it doesn't, but do we really have to produce and consume more and more silly packaged water, make huge packages for small amounts of food, and other kinds of nonsense?
It's just that all this economics seem to go against common sense to me. What do you think?

matchewed

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Re: If everybody became frugal
« Reply #1 on: May 28, 2015, 01:34:46 PM »
So to begin with what is happening/has happened in Japan is not a "what if everyone became frugal?" scenario. It is a complex scenario involving currency valuation, general economic growth, and investing habits of the general populace. The "what if everyone became frugal?" scenario is more of a general question of what society would be like assuming everyone was Mustachian. That is it is more of an idyllic examination of what would life be like if we consumed less and embraced all sorts of other cultural values. Realistically there would be consequences when compared to how the world is currently seen but that might not be a bad thing. It would be disruptive for some time as society adjusted to lower work hours. In short it's an apples to oranges to point at Japan and show the world what it would be like if everyone were frugal. Plus frugality isn't just a matter for saving money, saving money is a consequence of frugality, but it's not necessarily the end goal. There are several reasons one could be frugal.

As for your second question, I'm sure there are some economists out there who've probably spent their entire career trying to answer that question. I'm not an economist but my take on it is that an economy is a reflection of the productive capability of a particular subset of the human population. As humans become more efficient their productive capability rises. The difficulty is the how you measure this (what metrics do you use), and how do you define productive capability in a world where machines start replacing people? Our old standards of looking at things like unemployment statistics as a barometer for the economic outlook of a country start going wacko in that world. Furthermore you're brushing on another problem with looking at economic growth as a positive, and that is a support of capitalism/consumerism. Economic growth as I previously defined is seen as a positive if you're into the whole capitalism and/or consumerism. It's a barometer for the current regime of economic model which most countries follow. Try reading some economic writings. Adam Smith, Keynes...

Probably not in our lifetime but it could change.


skunkfunk

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Re: If everybody became frugal
« Reply #3 on: May 28, 2015, 02:07:11 PM »
http://physics.ucsd.edu/do-the-math/2011/09/discovering-limits-to-growth/

Nice thought experiment. You could waste a couple of days reading this guy's stuff.

Travis

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Re: If everybody became frugal
« Reply #4 on: May 28, 2015, 02:11:53 PM »
Question #1: The Japanese economy was nearly wiped out in the mid 1990s due to loose regulations and poor planning with how they spent money at the corporate and national levels.  It was a monetary/debt bubble far worse than ours that burst and will take decades to sort out if they ever do.  (China is coming dangerously close to this same phenomenon.)

http://en.wikipedia.org/wiki/Lost_Decade_(Japan)

Question #2: Generally speaking, an economy has to grow due to a growing workforce.  The population goes up and so economic activity must go up with it.  If the economy didn't budge, but there are more people around that generally means higher unemployment.  As Matchewed mentioned, the increasing automation of our workforce can make these things difficult to measure, but the price of goods and dollar value of our output are still good metrics.
« Last Edit: May 28, 2015, 04:46:34 PM by Travis »

Sid Hoffman

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Re: If everybody became frugal
« Reply #5 on: May 28, 2015, 04:09:10 PM »
Japan is a totally different case because their collapse is party due to massive, 200% of GDP federal debt, and party due to the fact their population is both shrinking (making debt to GDP worse, as the population end of that fraction gets smaller) and aging dramatically overall, meaning fewer workers.

Compare 1950 Japan to 2007 to the projection for 2050:



Spending habits will never change because human nature never changes.  Only a few percent will likely ever change to extreme frugality of the type where you're targeting retirement by age 40 or so.  That isn't enough to make a major shift in the economy.  However, population growth and the age spread of a nation is already changing dramatically and is expected to continue.  Our real economic problems lie with the managing of the population, as it's unclear if we're on a path to voluntary extinction, or what the true long-term extrapolation is going to be.  Japan uninhabited by the year 2500 seems crazy, but if present trends continue, that's what it would look like.

Sblak

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Re: If everybody became frugal
« Reply #6 on: May 28, 2015, 04:39:05 PM »
Question #2: Generally speaking, an economy has to grow due to a growing workforce.  The population goes up and so economic activity must go up with it.  If the economy didn't budge, but there are more people around that generally means higher unemployment.  As Matchewed mentioned, the increasing automation of our workforce can make these things difficult to measure, but the price of goods and dollar value of our output are still good metrics.

The population growth rate of most of the developed world is shrinking, compared to growing like it was last century.  Go see http://en.wikipedia.org/wiki/World_population.  So the GDP of a nation does not have to continue to increase, inflation adjusted, for everyone to be happy.  The workforce is also shrinking as the population average age shifts upward, with older people leaving the workforce but not the population. 

The problem with many of the world's economies is that the governments assume increasing population growth and associated economic increases when deciding upon policies and taking on debt, but fail to account for the increasing expenses of an aging population that is consuming but not producing.

nereo

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Re: If everybody became frugal
« Reply #7 on: May 28, 2015, 05:10:24 PM »

The population growth rate of most of the developed world is shrinking, compared to growing like it was last century.  Go see http://en.wikipedia.org/wiki/World_population.  So the GDP of a nation does not have to continue to increase, inflation adjusted, for everyone to be happy.  The workforce is also shrinking as the population average age shifts upward, with older people leaving the workforce but not the population. 

It's also interesting to note which economies are projected to have an increase or decrease in the working population over the next 35 years...

forummm

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Re: If everybody became frugal
« Reply #8 on: May 28, 2015, 06:20:47 PM »
Interesting graph, Nereo.

The population increase in the US is significantly due to immigration. Even though some loud voices aren't always welcoming to immigrants, they are a huge benefit to our economy. Partly for some of the reasons mentioned here, and partly because it's typically the cream of the crop that can jump through all the hoops to get here.

nereo

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Re: If everybody became frugal
« Reply #9 on: May 28, 2015, 06:52:50 PM »
Interesting graph, Nereo.

The population increase in the US is significantly due to immigration. Even though some loud voices aren't always welcoming to immigrants, they are a huge benefit to our economy. Partly for some of the reasons mentioned here, and partly because it's typically the cream of the crop that can jump through all the hoops to get here.
to be fair the graph I posted above doesn't measure the % population change, which would go a long way in making China seem not quite as bad as it may first seem, and the US not quite as good as it is there.  Still, I'm deeply worried about China's population in the coming decades - they have all the demographic problems that Japan had twenty years ago, only more extreme.

Yes, immigration is certainly helping the US, but so is their native birth rates.  It's one of only countries of the G20 that still has a (very slightly) increasing birth rate.

EscapeVelocity2020

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Re: If everybody became frugal
« Reply #10 on: May 28, 2015, 07:16:20 PM »
Posting to follow.  Although everyone here has an interest in shooting holes in the logic you threw out, America is now the Japan of yesteryear (and Europe before that all the way back to Rome, etc.).  This small, young nation has been at the top for a while, and although I saw some pretty graphs and charts, I am interested to do a deep disinterested dive into why others believe that this nation is  different (although other countries like India and China have more manpower and incentive).  Meanwhile here, the Fed has continued to manipulate growth more than I personally think was necessary (to firm up the shaky foundation that Investment Banks built).  In the whole scheme of things, immigration is slowing and our population is ageing (undermining important social programs), so I also am interested in why more people aren't worried about the parallels with late 1980's Japan (which was before my time, but I know they were incredibly domestically rich and started buying up lots of valuable U.S. real estate in NYC and Hawaii).

And I wouldn't be depressed at all if we were Japan for the next 20+ years.  They have a good standard of living, focus on savings, respect their elders... Just because their domestic stock market has not kept up with others doesn't mean that every national is 'depressed'.

Travis

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Re: If everybody became frugal
« Reply #11 on: May 28, 2015, 07:18:23 PM »
Interesting graph, Nereo.

The population increase in the US is significantly due to immigration. Even though some loud voices aren't always welcoming to immigrants, they are a huge benefit to our economy. Partly for some of the reasons mentioned here, and partly because it's typically the cream of the crop that can jump through all the hoops to get here.
to be fair the graph I posted above doesn't measure the % population change, which would go a long way in making China seem not quite as bad as it may first seem, and the US not quite as good as it is there.  Still, I'm deeply worried about China's population in the coming decades - they have all the demographic problems that Japan had twenty years ago, only more extreme.

Yes, immigration is certainly helping the US, but so is their native birth rates.  It's one of only countries of the G20 that still has a (very slightly) increasing birth rate.

Spain, Japan, and a couple other countries are shooting themselves in the foot by having negative population growth and having very strict immigration policies.  For those two countries there is the risk of them collapsing as independent races/cultures in the next century.  Russia isn't quite there, but they have the ingredients for the coming age imbalances.  China will experience some problems in about a decade when a critical mass of the "one child" generation comes of age and starts looking for jobs and to create families.  They're going to experience a gender imbalance that Chinese officials only recognized a few years ago.  Their currency is almost to the point of being openly traded (they've been weaning off the artificial controls), but they have a massive real estate bubble built up due to repeating Japan's mistakes of not marrying credit to risk and building infrastructure without demand.

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Re: If everybody became frugal
« Reply #12 on: May 28, 2015, 07:31:16 PM »
Quote
but I know they were incredibly domestically rich and started buying up lots of valuable U.S. real estate in NYC and Hawaii).

Much of that boom was bought on cheap credit from a poorly regulated banking system.  They seemed rich to us in the US because Japanese corporations were buying other companies and real estate far in excess of what they were worth, and nobody was paying attention to whether the easy loans could possibly be paid back.  Much like our recent housing bubble, it finally collapsed under its own weight.  Unlike us, a massive portion of Japan's entire economy was leveraged in that ordeal.  Their government will be paying for those mistakes for decades. They are on the hook for this spending to the tune of 240% of their GDP.  The US is sitting around 70% and we argue every year about toning it down.  We don't want to be Japan.

EscapeVelocity2020

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Re: If everybody became frugal
« Reply #13 on: May 28, 2015, 08:43:30 PM »
Quote
but I know they were incredibly domestically rich and started buying up lots of valuable U.S. real estate in NYC and Hawaii).

Much of that boom was bought on cheap credit from a poorly regulated banking system.  They seemed rich to us in the US because Japanese corporations were buying other companies and real estate far in excess of what they were worth, and nobody was paying attention to whether the easy loans could possibly be paid back.  Much like our recent housing bubble, it finally collapsed under its own weight.  Unlike us, a massive portion of Japan's entire economy was leveraged in that ordeal.  Their government will be paying for those mistakes for decades. They are on the hook for this spending to the tune of 240% of their GDP.  The US is sitting around 70% and we argue every year about toning it down.  We don't want to be Japan.

Sorry to quote the whole thing you posted, but after reading various insider stories about how US Financiers profited off of other countries (Soros (and hedge funds) e.g. read 'Traders, Guns, and Money' (Satyayit - http://www.gbv.de/dms/zbw/689960190.pdf)) , I don't see your counter-point at all.  America seems to always be out for itself, much like Japan was, but I am not disinterested - I am heavily invested in America's continued freedom and prosperity.  However, our 'reforms' of the banking system to transfer some risk and reward away have been weak and the leverage employed to continue our prosperity rivals that of Japan.  The only difference, I would guess, is that it is more transparent now than in Japan back then. 
Another real worry, these days, should be how 'strong' the US Dollar' has become. 

Travis

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Re: If everybody became frugal
« Reply #14 on: May 28, 2015, 10:22:26 PM »
Quote
but I know they were incredibly domestically rich and started buying up lots of valuable U.S. real estate in NYC and Hawaii).

Much of that boom was bought on cheap credit from a poorly regulated banking system.  They seemed rich to us in the US because Japanese corporations were buying other companies and real estate far in excess of what they were worth, and nobody was paying attention to whether the easy loans could possibly be paid back.  Much like our recent housing bubble, it finally collapsed under its own weight.  Unlike us, a massive portion of Japan's entire economy was leveraged in that ordeal.  Their government will be paying for those mistakes for decades. They are on the hook for this spending to the tune of 240% of their GDP.  The US is sitting around 70% and we argue every year about toning it down.  We don't want to be Japan.

Sorry to quote the whole thing you posted, but after reading various insider stories about how US Financiers profited off of other countries (Soros (and hedge funds) e.g. read 'Traders, Guns, and Money' (Satyayit - http://www.gbv.de/dms/zbw/689960190.pdf)) , I don't see your counter-point at all.  America seems to always be out for itself, much like Japan was, but I am not disinterested - I am heavily invested in America's continued freedom and prosperity.  However, our 'reforms' of the banking system to transfer some risk and reward away have been weak and the leverage employed to continue our prosperity rivals that of Japan.  The only difference, I would guess, is that it is more transparent now than in Japan back then. 
Another real worry, these days, should be how 'strong' the US Dollar' has become.

I'm not sure where the "America out for itself" issue came from.  I didn't bring it up.  I was pointing out that Japan's 1980s/90s prosperity that you appeared to want to emulate was an illusion.  They recklessly spent money they didn't have and couldn't pay the bills.  We have our problems (which I noted), but we haven't yet gone overboard like they did and they present us with a worst-case scenario we should continue to study.

Sid Hoffman

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Re: If everybody became frugal
« Reply #15 on: May 28, 2015, 11:33:57 PM »
The population increase in the US is significantly due to immigration. Even though some loud voices aren't always welcoming to immigrants, they are a huge benefit to our economy. Partly for some of the reasons mentioned here, and partly because it's typically the cream of the crop that can jump through all the hoops to get here.

I suspect we're no more than 15 years from major immigration reform too.  I think more people are seeing that people are coming here anyway, so we might as well make it easier to do it legally and get them actually fully integrated into the country.  It's wildly polarized here in the southwest, with a ton of fear from traditionalists, but I use that word because I know quite a lot of conservatives who support immigration reform, so long as it keeps the major criminals and drug runners out and gets the good, hard working people in safely.

EscapeVelocity2020

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Re: If everybody became frugal
« Reply #16 on: May 29, 2015, 02:01:07 AM »
Travis, of course we are all just stating our opinions, just to keep it interesting.  If we stick to the facts and extrapolate recent history, well we all retire on time and with more money and global influence than we originally thought.  Where is the fun in discussing that?

Travis

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Re: If everybody became frugal
« Reply #17 on: May 29, 2015, 12:57:50 PM »
Travis, of course we are all just stating our opinions, just to keep it interesting.  If we stick to the facts and extrapolate recent history, well we all retire on time and with more money and global influence than we originally thought.  Where is the fun in discussing that?

I have degrees in precisely that, so I get a great deal of enjoyment out of it :)

skunkfunk

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Re: If everybody became frugal
« Reply #18 on: May 29, 2015, 02:34:20 PM »
Beware ruthless extrapolation.

Population growth/decay/whatever will change. It's fairly unpredictable. I don't think we can make any statement at all about whether it will stabilize, or go extinct, or whatever. It's too far off, demographic changes over time, etc.

EscapeVelocity2020

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Re: If everybody became frugal
« Reply #19 on: May 29, 2015, 09:04:02 PM »
I have degrees in precisely that, so I get a great deal of enjoyment out of it :)
Well, I like to listen to EconTalk.org podcasts on my way to and from work and they tell me to be wary of you experts :)  But I do appreciate people with degrees.  What do you think of the 'Tragedy of the Commons'? 

retireatbirth

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Re: If everybody became frugal
« Reply #20 on: May 31, 2015, 01:59:02 PM »
Posting to follow.  Although everyone here has an interest in shooting holes in the logic you threw out, America is now the Japan of yesteryear (and Europe before that all the way back to Rome, etc.).  This small, young nation has been at the top for a while, and although I saw some pretty graphs and charts, I am interested to do a deep disinterested dive into why others believe that this nation is  different (although other countries like India and China have more manpower and incentive).  Meanwhile here, the Fed has continued to manipulate growth more than I personally think was necessary (to firm up the shaky foundation that Investment Banks built).  In the whole scheme of things, immigration is slowing and our population is ageing (undermining important social programs), so I also am interested in why more people aren't worried about the parallels with late 1980's Japan (which was before my time, but I know they were incredibly domestically rich and started buying up lots of valuable U.S. real estate in NYC and Hawaii).

And I wouldn't be depressed at all if we were Japan for the next 20+ years.  They have a good standard of living, focus on savings, respect their elders... Just because their domestic stock market has not kept up with others doesn't mean that every national is 'depressed'.

The world is different than it was in the '80s. We're all more connected. US companies aren't dependent on growth at home and will do just fine with international growth, creating management jobs and stock market growth in the US. Of course, only the well educated are going to benefit from this new economy so its not going to do anything about income inequality. A smaller working age population is not really an obstacle since there will be less jobs - education is a concern though.

I think the US will be fine. We don't really need any new products or innovation at home - we'll just be the kingpins managing the world economy from our cozy, air-conditioned offices. Or, in the case of Mustachians, our homes, since we own all the manager slaves.

nereo

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Re: If everybody became frugal
« Reply #21 on: May 31, 2015, 02:18:09 PM »

The world is different than it was in the '80s. We're all more connected. US companies aren't dependent on growth at home and will do just fine with international growth, creating management jobs and stock market growth in the US. Of course, only the well educated are going to benefit from this new economy so its not going to do anything about income inequality. A smaller working age population is not really an obstacle since there will be less jobs - education is a concern though.

I think the US will be fine. We don't really need any new products or innovation at home - we'll just be the kingpins managing the world economy from our cozy, air-conditioned offices. Or, in the case of Mustachians, our homes, since we own all the manager slaves.
... or in other words... "it's different this time!"

retireatbirth

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Re: If everybody became frugal
« Reply #22 on: June 01, 2015, 05:39:18 PM »

The world is different than it was in the '80s. We're all more connected. US companies aren't dependent on growth at home and will do just fine with international growth, creating management jobs and stock market growth in the US. Of course, only the well educated are going to benefit from this new economy so its not going to do anything about income inequality. A smaller working age population is not really an obstacle since there will be less jobs - education is a concern though.

I think the US will be fine. We don't really need any new products or innovation at home - we'll just be the kingpins managing the world economy from our cozy, air-conditioned offices. Or, in the case of Mustachians, our homes, since we own all the manager slaves.
... or in other words... "it's different this time!"

Not at all. I'm actually arguing its more of the same as far as the stock market continuing to go up.

nereo

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Re: If everybody became frugal
« Reply #23 on: June 02, 2015, 07:02:52 AM »

The world is different than it was in the '80s. We're all more connected. US companies aren't dependent on growth at home and will do just fine with international growth, creating management jobs and stock market growth in the US. Of course, only the well educated are going to benefit from this new economy so its not going to do anything about income inequality. A smaller working age population is not really an obstacle since there will be less jobs - education is a concern though.

I think the US will be fine. We don't really need any new products or innovation at home - we'll just be the kingpins managing the world economy from our cozy, air-conditioned offices. Or, in the case of Mustachians, our homes, since we own all the manager slaves.
... or in other words... "it's different this time!"

Not at all. I'm actually arguing its more of the same as far as the stock market continuing to go up.
so.... your conclusion is that the market will continue to provide returns more-or-less in line with previous decades because the world is so different?
That's a hard concept to wrap my head around this early in the morning.  Maybe after I've had more coffee.

btw, what is a 'manager slave'?

anathem

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Re: If everybody became frugal
« Reply #24 on: June 02, 2015, 02:22:00 PM »
If everyone just became more frugal and saved more, I suspect it would be good for the overall economy.  Saving is investment, and while yes, there is a point where too much saving negatively inpacts growth, we are nowhere near that point.  America needs more saving, not less.

The real problem would be if everyone also worked less, and retired early.  If even there was a sizable percentage of people that did this, overall the economy would be on a slower growth path due to fewer people working.  This may not be a bad thing if people are happier doing this though. 

matchewed

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Re: If everybody became frugal
« Reply #25 on: June 02, 2015, 02:29:30 PM »
If everyone just became more frugal and saved more, I suspect it would be good for the overall economy.  Saving is investment, and while yes, there is a point where too much saving negatively inpacts growth, we are nowhere near that point.  America needs more saving, not less.

The real problem would be if everyone also worked less, and retired early.  If even there was a sizable percentage of people that did this, overall the economy would be on a slower growth path due to fewer people working.  This may not be a bad thing if people are happier doing this though.

Saving != investing

I can save my money and bury it in the backyard. Unless you see it as investing in a future money tree it's not exactly investing.

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Re: If everybody became frugal
« Reply #26 on: June 02, 2015, 05:06:06 PM »
Saving != investing

I can save my money and bury it in the backyard. Unless you see it as investing in a future money tree it's not exactly investing.

First off, I think many people use those terms interchangeably.  In fact, many of us say we are saving money when we reduce the amount we are spending on something, too.  It's still the word saving, but a different use.  As to your point about using a bank savings account, in terms of the overall effect on the economy, that's still going to benefit.  The more that people put money in savings accounts, the cheaper that home & car loans get because banks start finding themselves overflowing with cash and needing to find ways to get it loaned out.  So in a way, even putting money in a savings account is good for the economy because it lowers the cost of borrowing money for everyone.

matchewed

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Re: If everybody became frugal
« Reply #27 on: June 02, 2015, 05:30:41 PM »
Saving != investing

I can save my money and bury it in the backyard. Unless you see it as investing in a future money tree it's not exactly investing.

First off, I think many people use those terms interchangeably.  In fact, many of us say we are saving money when we reduce the amount we are spending on something, too.  It's still the word saving, but a different use.  As to your point about using a bank savings account, in terms of the overall effect on the economy, that's still going to benefit.  The more that people put money in savings accounts, the cheaper that home & car loans get because banks start finding themselves overflowing with cash and needing to find ways to get it loaned out.  So in a way, even putting money in a savings account is good for the economy because it lowers the cost of borrowing money for everyone.

I didn't mention a bank account. I literally meant burying your money. So no point was made by me about a savings account.

Saving money to me means either getting something at a price lower than market, "I saved $15 on groceries.", or putting aside money regardless of intent of use for that money, "I saved $15 for...". Investment can be the intended use but it isn't the only use when saving money. In the end I'm saving money now for investing only for it to be spent later.

anathem

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Re: If everybody became frugal
« Reply #28 on: June 02, 2015, 10:55:54 PM »
By saying savings, I am not talking about saving as in i saved money on the gas bill, I am talking about, I put this money in my bank account/vanguard/mutual fund/made a loan type of saving, and did not consume it immediatly.

In economics what is not consumed is saved and what is not consumed is saved.  Savings = Investment is simply a tautology.   Yes it can get a bit more complicated than that, but saving in the conventional sense is for economic purposes, investment.

matchewed

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Re: If everybody became frugal
« Reply #29 on: June 03, 2015, 03:22:23 AM »
I don't disagree that economics defines savings as deferred consumption. But that money doesn't necessarily have to be invested. In your original post you talked about saving being good for the overall economy. Since the question of everybody becoming frugal is itself a stretched concept, I merely stretched another part of it. If everyone were to save their money in jars behind their houses would that be good for the overall economy?

EscapeVelocity2020

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Re: If everybody became frugal
« Reply #30 on: June 03, 2015, 11:42:04 AM »
If everyone just became more frugal and saved more, I suspect it would be good for the overall economy. 

I suspect that you suspect wrong and that your suspicions are, in themselves, suspect.

anathem

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Re: If everybody became frugal
« Reply #31 on: June 03, 2015, 12:14:47 PM »


Here is a quick graph I found.  In general, as countries save more, their growth rate incrreases. This is because they are investing more money in their economy.


nereo

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Re: If everybody became frugal
« Reply #32 on: June 03, 2015, 12:16:15 PM »


Here is a quick graph I found.  In general, as countries save more, their growth rate incrreases. This is because they are investing more money in their economy.
source?

EscapeVelocity2020

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Re: If everybody became frugal
« Reply #33 on: June 03, 2015, 01:28:05 PM »
Here is a quick graph I found.  In general, as countries save more, their growth rate incrreases. This is because they are investing more money in their economy.
I'd like to see the associated report.  I could just as easily say that the correlation runs the other way - that a higher growth rate results in excess discretionary funds which allows people to save more.  But either way, what overshadows all of this discussion is that you don't get any GDP growth at all if consumers are 'saving' and not buying produced goods.

Bob W

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Re: If everybody became frugal
« Reply #34 on: June 08, 2015, 03:44:42 PM »
Here is a quick graph I found.  In general, as countries save more, their growth rate incrreases. This is because they are investing more money in their economy.
I'd like to see the associated report.  I could just as easily say that the correlation runs the other way - that a higher growth rate results in excess discretionary funds which allows people to save more.  But either way, what overshadows all of this discussion is that you don't get any GDP growth at all if consumers are 'saving' and not buying produced goods.

Well you could easily increase GDP and increase savings by primarily being an exporting nation.  The Japanese did this for a very long time. 

Think of it this way.  In the Jewess culture in the US money stays within their group for about 25 turns and takes months to filter out.  In the African American community money does about 1 turn and is gone in hours.   You can see the end result of this.  (no and I'm not relooking up a source that I viewed like 3 years ago)

It would work the same in your family.   If you and your wife work and only buy services and goods from each other,  all your money stays in your small economic unit. 

Sid Hoffman

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Re: If everybody became frugal
« Reply #35 on: June 08, 2015, 07:59:23 PM »
So am I correct in saying based on the above information that a reduction in consumerism would mean a reduction in imports of imported consumerist trappings like Chinese electronics and oil (by way of wasteful driving and automobile choice)?  It seems that a lot of the consumerist junk is imported stuff.  So by reducing imports, the nation's overall trade balance improves, thus the overall economy gets stronger?  Is that the theory I take away from the comments above?

brooklynguy

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Re: If everybody became frugal
« Reply #36 on: June 09, 2015, 01:31:22 PM »
In the Jewess culture in the US money stays within their group for about 25 turns and takes months to filter out.  In the African American community money does about 1 turn and is gone in hours.

You may want to reconsider your stance on refusing to re-look up your three year old source, given that you've provided several reasons for us to doubt that the quoted two sentences represent a reliable summary of whatever study you are referring to (not the least of which being your use of a derogatory term for a female Jewish person in lieu of the word "Jewish," which is presumably the word you intended).

EscapeVelocity2020

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Re: If everybody became frugal
« Reply #37 on: June 09, 2015, 01:56:34 PM »
...So by reducing imports, the nation's overall trade balance improves, thus the overall economy gets stronger...

Just to clear up your misconception, running a trade deficit does not imply that the host nation economy (e.g. the US) is weak (or being weakened) as compared to the nations it imports from.  In fact, globalization has improved the standard of living in the US.  Protectionist policies, artificially reducing global trade, are not an efficient way to 'make your economy stronger'. 

Although a simplistic view might make it seem like running a trade deficit will eventually bankrupt the host economy (you are giving away USD for their goods, surely you'll run out of USD or they'll have too much someday!), the bigger picture is that other countries are still buying US bonds and rewarding the USD as a strong currency, and generally doing things that help facilitate our buying their goods (and protect our economy), because it is good for them too.

I'm not an economist, but the US has been running a trade deficit since 1975 - it's a bit odd to just now to start complaining that it has been bad for America.  Read through this primer and tell me what you think - http://investing.calsci.com/money3.html 

financiallypossible

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Re: If everybody became frugal
« Reply #38 on: November 03, 2016, 12:55:28 PM »
Spending habits will never change because human nature never changes.  Only a few percent will likely ever change to extreme frugality of the type where you're targeting retirement by age 40 or so.  That isn't enough to make a major shift in the economy.  However, population growth and the age spread of a nation is already changing dramatically and is expected to continue.  Our real economic problems lie with the managing of the population, as it's unclear if we're on a path to voluntary extinction, or what the true long-term extrapolation is going to be.  Japan uninhabited by the year 2500 seems crazy, but if present trends continue, that's what it would look like.

I agree with you that it's unlikely a majority will ever take to extreme frugality. However, I disagree with your premise that spending habits will not change.

Spending habits in America have become worse since the invention of the credit card. Why couldn't they become better? If even gradually so to the point where everyone is at least saving some of their income.