Given today's grim scenario, one thing that definitely wont save us is savings!. When economy is on a downward spiral, companies stop producing, stop making profits, start firing people.. Now people stop spending, that leads to lower demand and companies stop producing ... this is the vicious circle. We have been through this in an earlier post.
Now what governments need to do, as advocated by the reinstated master Keynes is to put money in people's pockets. This is to ensure that people spend more. No matter how the government does it - by slashing interest rates, by creating new projects (read jobs), by cutting sales taxes - success will come only when that money is being spent by public. Spending will create demand that will boost supply, increase profits, create jobs and go on..
So if we start tightening our purse strings to spend on a rainy day, well.. this IS the rainy day. As governments start doing their job to support the falling economy, public has to do its part by spending enough. This is not a time to listen to old middle-class tales of how savings will save us eventually - it is in fact the right opposite. It is time to break piggy banks and buy that stuff you have always wanted. Buy a house, dress, stocks, chocolates, gift items, jewelery. Tour the nation. Stay/Eat in hotels. USE THE MONEY. Our recovery is dependent on our spending no matter what the government does or intends to do.
Maybe the FM should tax people who save more and boost spending. Lets spend and save the economy!
Now what governments need to do, as advocated by the reinstated master Keynes is to put money in people's pockets. This is to ensure that people spend more. No matter how the government does it - by slashing interest rates, by creating new projects (read jobs), by cutting sales taxes - success will come only when that money is being spent by public. Spending will create demand that will boost supply, increase profits, create jobs and go on..
So if we start tightening our purse strings to spend on a rainy day, well.. this IS the rainy day. As governments start doing their job to support the falling economy, public has to do its part by spending enough. This is not a time to listen to old middle-class tales of how savings will save us eventually - it is in fact the right opposite. It is time to break piggy banks and buy that stuff you have always wanted. Buy a house, dress, stocks, chocolates, gift items, jewelery. Tour the nation. Stay/Eat in hotels. USE THE MONEY. Our recovery is dependent on our spending no matter what the government does or intends to do.
Maybe the FM should tax people who save more and boost spending. Lets spend and save the economy!
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