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Saturday, January 17, 2009

Stimulating Consumption Won't Help the Economy

Ask yourself: can you consume your way to prosperity? Of course not. So how can a society do so? Greater consumption is the effect not the cause of economic growth, yet this is so contrary to conventional wisdom that you can read newspapers and watch news programs for months without seeing this truth expressed.

To say the recession was caused by diminished demand is to say that the recession was caused by the recession. The fact is, people are holding on to their cash because the economy is in recession and they are uncertain about the future. As we’ll see, it is exactly under these circumstances that people should be saving.

The rest of this week's op-ed, "Stimulating Consumption Won't Help the Economy," is at The Future of Freedom Foundation website.

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