Guess who's being blamed for "prolonging the recession"?

[Nikki Stone1]

http://business.timesonline.co.uk/tol/business/economics/article6965784.ece

Thrifty families accused of prolonging the recession

Anxious families are repaying debts instead of spending in the shops, amid concern over the uncertain economic outlook. The share of income saved in banks and building societies has risen to its highest level in more than a decade, heightening fears that faltering consumer demand could prolong the recession.

The savings ratio — the gap between household income and spending, which is often used to repay debts or add to savings — soared to 8.6 per cent between July and September, the highest level since 1998.

Analysts fear that consumer spending, which rose by 0.1 per cent in the third quarter, its first growth since the start of the recession, will remain muted as households continue to repay debts and save.

Consumers repaid about £5 billion more than they borrowed between July and September last year and the same period this year, according to the Office for National Statistics (ONS). This is a sharp fall compared with net borrowing of £43 billion in 2008 and £120 billion in 2007.

The economist John Maynard Keynes argued that while saving may be a virtue for an individual, a nation of people doing the same would slow the economy. This in turn would hurt those trying to save more. He called this the paradox of thrift....

[timeforpeace]

1. Blaming Bush is always handy.

[laughingliberal]

2. Heh! I'm all for starving the beast

If people refuse to fall back into old spending habits TPTB may, one day, figure out we want decent jobs out here in average people land and we aren't buying their crap til we get them. Don't buy anything you can live without.

[StarfarerBill]

4. Ditto. I was thrifty long before this recession hit.

[amborin]

5. ditto! and if families were smart, they'd be super thrifty for decades

solves many problems, including the brimming landfills, the garbage pools in the oceans, and might dampen our insane materialism

[StarfarerBill]

11. Triple ditto.

[Nikki Stone1]

12. Agreed.

Part of it is that we are so marketed to that we feel we must have every new thing. Certain things are better new--like computers--but even then, we have to be sensible about it.

[Kurt_and_Hunter]

3. "The paradox of thrift"

It's a genuine problem. That's why down-turns feed on themselves and why really bad down-turns require government action to spend money that individuals are (quite sensibly) reluctant to spend.

[monmouth]

6. What thrilled me this shopping season was that people were

using cash. Credit cards were not being used, at least by the middle and lower middle class. One lady told me it would be the first January in decades she didn't face any debt and how good it felt. I couldn't agree more.

[spanone]

7. bill clinton????

[underpants]

8. They are turning the middle class on the middle class? I thought that was just for the poor

see my sig line

[Echo In Light]

9. Nikki, although I'm sure you're quite aware, your threads really bring out the personal unrecs

... which is to say, you're a prime example of how the Just Trying To Keep This Off The Greatest Page talking point is empty rhetoric ;)

[Nikki Stone1]

10. Of course.

I would rather be admired by some and hated by others than be loved by all.

[n2doc]

13. They are just saving up for their new healthcare(tm) plans n/t

[Nikki Stone1]

15. Ouch!!!

Good one.

[girl gone mad]

14. This is a very positive development.

While it's bad for consumer-driven businesses, it's a good first step for restoring the balance sheets of the American middle class. Debt levels have to revert to something more in line with historical trends before we can really get a solid recovery.

Upthread, someone mentioned the government picking up the slack. I don't see that as a feasible solution over the medium to long term. The government never cut back on spending when our economy became overheated, therefore, we don't have very much breathing room. What's more, I see government spending as having a negative psychological impact right now. People look at the vast amounts of capital our government is pouring into failed banks and businesses and they get nervous at the prospect of future tax hikes or hyperinflation. I think this is causing consumers and businesses to proceed with caution on spending, investment and hiring plans.

[Nikki Stone1]

16. I believe so too

But you know companies are going to be going out of their minds. They need to sell their crap, after all.

[kath]

17. THe article in the OP is about the UK - but probably pertains to the US as well...