The Paradox of Thrift: “Wrong” [updated]
Why, in the current crisis, are governments so keen to promote spending? What’s the theory behind all the giveaways and the shopping subsidies? It’s based on something Keynes called the Paradox of Thrift, and like most of his nostrums it’s wrong, wrong, wrong
Bernard Hickey investigates the Paradox of Thrift in this four-minute video, and finds its wrong -- which means saving more makes sense and government handouts don’t make sense.
It might sound like Economics 101, but what Bernard’s trying to remedy is some of the Keynesian crap students are actually taught in 101.
UPDATE: On the subject of Econ 101, CATO’s Clifford Thies looks at the evolution of this particular bad idea through the textbooks. Read The Paradox of Thrift: RIP.
And Robert Murphy points out, contra Krugman, that just because we're in a situation like this, it doesn’t mean that normal economic rules don't apply. Does "Depression Economics" Change the Rules? No, it doesn’t. Foolishness is foolishness, whenever and wherever it occurs.