The paradox of saving-why do you say that the more you save, the poorer you get?

Why do some people say that the more frugal residents are, the poorer the country will be?

From now on, I will follow Mr. Liu Run's course to learn some basic knowledge of macroeconomics.

Macroeconomics is said to be abstract and puzzling, and some people even think it is pseudoscience, because there are many elements of speculation and imagination in it. However, macroeconomics is very important for improving the understanding of economic phenomena.

When it comes to macroeconomics, we should start with a concept, that is, the paradox of savings.

What is the paradox of saving?

The paradox of thrift is a fable mentioned by the famous economist Keynes in his works. There is a nest of bees, living well, eating and drinking the sea every day, and having a very prosperous life. Later, they were taught not to be extravagant. As a result, the principle of thrift was implemented, and the result turned out to be a rapid decline.

The paradox of saving means that the more you save, the more you decline. Keynes believed that the same was true of human society.

Why do you say that?

Thrift is a virtue for individuals, which is no problem. But for the country, saving means reducing consumption, and the reduction of your consumption is not only your own business, you don't consume, or the consumption you reduce is actually the income of others. At the same time, it also means that the income of enterprises is reduced. The enterprise's income is reduced, the operation is difficult, the output is reduced, and the workers are dismissed. Then the income of workers will be reduced, and even if they are fired, they dare not consume, which further reduces the income of enterprises. Then from reducing production to layoffs, back and forth.

In other words, the more a country saves, the poorer it becomes, and a paradox of saving in a poverty cycle will be formed. It means that the more you save, the poorer you are, but the more you spend, the richer you are.

To understand the paradox of thrift, we should also mention another concept of macroeconomics-GDP.

GDP refers to the gross domestic product.

Refers to the total value of all products and services produced by a country in a period of time. GDP is recognized as the best indicator to measure a country's economic situation and wealth, so how to calculate this total value? Its total value is actually buying and selling, including consumption, investment, government procurement and export.

Seeing this composition, we can also understand why Keynes encouraged consumption. The more business, the higher the GDP.

To understand the problem that consumption drives GDP growth, we should also mention another concept, which is called "multiplier effect".

What is the multiplier effect?

The multiplier effect is that your consumption is someone else's income, and his income will become new consumption or investment, so it will get bigger and bigger. This is the multiplier effect.

According to this theory, money can only create value by circulation.

There is a story like this: a tourist arrived at a hotel in a small town and was going to stay. He paid a deposit of 100 yuan first, and then the waiter took him upstairs to see the house. At this time, the shopkeeper returned this 100 yuan to the meat seller, and the meat seller returned it to the cloth seller, and also returned it to the shopkeeper, paying the room rate that was in arrears before. The tourists were not satisfied with the room, so the shopkeeper returned this 100 yuan to the tourists. The money turned around and returned to the tourists, but the debt of the town has been paid off. This is the power of circulation.

Of course, from the perspective of macroeconomics, there are also different completely opposite views.

Positive Keynes said that the more savings, the more serious the recession. Opponents will say that the money that is not consumed is deposited in the bank, and the bank can increase investment with loans, which can also increase GDP and promote employment.

Zheng Fang said that he invested in production, but nobody bought it for economic reasons. On the other hand, it can be said that the product does not really meet the needs of consumption.

What about a positive rhetorical question? Opponents say that it will take a long time to save money and then invest it to promote economic growth.

On the positive side, we can say that in the long run, we will all die.

Who is right and who is wrong? There is no right or wrong, and the quarrel has continued until now.

After learning these basic concepts of macroeconomics, I have a better understanding of concepts that I didn't know much about in the past.

I think macroeconomics should study the allocation of social resources, from a very grand point of view. Unexpectedly, it started with the consumption of a nest of bees.

Economy has always been regarded as a virtue, but in the eyes of economists, it has become the cause of economic stagnation. This judgment and cognition is a subversion of my common sense.

But when you think about it, it still makes sense. It seems that this economics, especially macroeconomics, needs to be guessed and imagined. As long as it is reasonable and logical, we can think cognitively. Nothing is absolute truth.

For ordinary people, it is really too difficult to deeply understand the macro-level economic phenomena and to understand all kinds of economic phenomena and connections in this huge stranger society. Even these great economists hold two completely different views on the basic views of macroeconomics.

Of course, these basic concepts are only the introductory concepts of macroeconomics. Macroeconomics is used to guide the government to adjust the economy and so on, which will naturally have an impact on the economic life of each of us. Then, it is also beneficial to increase some knowledge of macroeconomics to make yourself clearer.

Learn more about macroeconomics, and then look at these concepts learned today, perhaps there will be new thinking and inspiration.