The Saving Problem in America: Alternatives and Reforms
Since before covid-19 and the lockdown, I have written articles that touch on the purpose and importance of personal savings, and more importantly, why the lack of personal savings was going to make an economic crisis in the year 2020 potentially tragic for most Americans.
As a result, I have been interviewed a couple of times specifically on the topic of personal savings. These interactions have indicated to me that people do not understand the importance of savings and rather believe the demonization of savings as a “leakage” from the economic system and that hoarding money is one of the greatest threats to the economy.
Even more importantly, I discussed the reasons why Americans save so little and the related dangers, and I discussed how you can get around those government interventions with alternative strategies. I thought most people knew these strategies, but apparently that is not the case and thus the rationale for this article.
The Importance of Saving
In order for the hunter-gatherer society to become settled and civilized with sedentary agriculture, people must have saved provisions or found themselves in an area of superabundance, i.e., a Garden of Eden. It is savings that sustained group members while structures were built and fields were plowed, seeded, and harvested.
Economics teachers use the story of Robinson Crusoe, who toiled to catch extra fish or gather extra coconuts in order to sustain himself while he built a fishing net or coconut-harvesting tool that could bring him many times the daily output from just working with his hands. His new higher productivity allowed Crusoe to pursue other projects like building a hut, fashioning a rescue signal, or just enjoying more tropical leisure.
Of course, personal and business savings are just as important for a modern economy to grow in a stable fashion. Money is deposited in bank, brokerage, and retirement accounts. Banks make money available for car loans, home mortgages, and for businesses to make payroll and to finance accounts receivable. Brokerage and retirement accounts are used to fund larger businesses, allowing them to expand and to implement new technologies. Ther
Article from Mises Wire