Better than QE ? (All GOVs do it)

[specuvestor]

^^^ This is actually called the Paradox of Thrift. When velocity of money increases, wealth and prosperity increase.

If I'm not wrong, what's been described isn't the Paradox of Thrift at all.

From Wiki:

The paradox of thrift (or paradox of saving) is a paradox of economics, popularized by John Maynard Keynes, though it had been stated as early as 1714 in The Fable of the Bees,[1] and similar sentiments date to antiquity.[2][3] The paradox states that if everyone tries to save more money during times of economic recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth. The paradox is, narrowly speaking, that total savings may fall even when individual savings attempt to rise, and, broadly speaking, that increase in savings may be harmful to an economy.

Hi Kazukirai

It is the same thing just as earnings yield to P/E, just that it is inverse.

In this example the individual debt and economic outcome will be stuck if everyone saves, ie A/R = A/P as egghead pointed out correctly but no cash flow, but if someone starts spending the entire system unwinds and if go another cycle the system as a whole increases wealth.

The bigger UNCOMFORTABLE implication in this paradox is that it challenges the basic tenant and commonly regarded axiom of the invisible hand ie self serving attitude of individuals collectively is positive to the whole society. In this paradox where people don't spend to save their own hide actually harms the aggregate

The invisible hand is not so effective afterall. IMHO Keynes is the Einstein of economics in a sense that they challenged the established ideology. Often people regard him as reckless fiscal spender but he is often more pragmatic than ideological- he can be neo-monetarist if the situation warrants it. He formulates based on observation and attempts to forecast rather than explain events. He is the "scientist" which is aptly summarised in his famous quote: When facts change I change my mind. What do you do sir?

IMHO Keynes is often given less credit than he is due. I'm thankful Bernanke was no ideological Trichet

[kazukirai]

Hi Kazukirai

It is the same thing just as earnings yield to P/E, just that it is inverse.

The whole concept here isn't exactly an equation.

The paradox of thrift is used to specifically describe why an individual saving (which most is seen as a good thing) is not good for the entire system. This is basically an example of a Fallacy of Composition.

To say that the inverse is also the paradox of thrift is misleading since we aren't talking about saving in the first place (which is what the word 'thrift' is alluding to).

I think more accurately what you're trying to say is better termed the 'spending multiplier'.

[Temperament]

Hi Kazukirai

It is the same thing just as earnings yield to P/E, just that it is inverse.

The whole concept here isn't exactly an equation.

The paradox of thrift is used to specifically describe why an individual saving (which most is seen as a good thing) is not good for the entire system. This is basically an example of a Fallacy of Composition.

To say that the inverse is also the paradox of thrift is misleading since we aren't talking about saving in the first place (which is what the word 'thrift' is alluding to).

I think more accurately what you're trying to say is better termed the 'spending multiplier'.

Hmm....
"paradox of thrift" & "spending multiplier"!
We need the $ to make the World goes round and round, so is a little of Human's compassion.