The good economic news is actually bad. Here's why. - The Washington Post - 0 views
www.washingtonpost.com/...8-8777-2a059f168dd2_story.html
savings habits consumption economic progress gratification
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In his essay “Economic Possibilities for our Grandchildren,” Keynes, seeking to dispel pessimism, predicted that, “assuming no important wars and no important increase in population,” the “permanent problem of the human race” — the “struggle for subsistence” — “may be solved.”
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This, Keynes warned, could discombobulate the human race’s neurological wiring, because mankind has evolved through many millennia for toil and stress. Basic “habits and instincts” are unsuitable for a future of leisure and abundance. Because we have evolved as creatures designed by nature “to strive and not to enjoy.” So, work would have to be apportioned, perhaps in three-hour shifts and 15-hour workweeks, to keep people preoccupied.
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In 1943, Paul Samuelson, who would become one of America’s leading economists and win a Nobel Prize, anticipated peace with foreboding. Good things — demobilization of more than 10 million from the armed services, the economy no longer busy producing instruments of destruction — would cause bad things. There would be “the greatest period of unemployment and industrial dislocation which any economy has ever faced.” Any economy. Ever.
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A 2015 Federal Reserve study revealed that half of those surveyed said they could not gather $400 to cope with an emergency; one-third said they could not sell assets, tap retirement savings or turn to family and friends to pay three months of expenses.
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In December, America’s household savings rate was the lowest (2.4 percent of disposable income) since the negative savings rates in 2005 and 2006, before the housing bubble burst.
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This stroll down memory lane suggests this rule: All news is economic news, because everything affects the economy, or reveals attitudes or behaviors that soon will affect it. And all economic news is bad — especially good economic news, because it gives rise to bad behavior.
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By 2017, median household savings ($14,500) for those near retirement age had declined 32 percent in a decade, and for the first time, older Americans had more credit card debt than younger Americans.
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Between 2003 and 2015, the indebtedness of those between ages 50 and 80 increased 60 percent. Today, those between 65 and 74 have five times more debt than that age cohort did two decades ago.
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Americans consider deferral of gratification unnatural, which it is. Time was, however, thrift was considered a virtue. People sat at kitchen tables, calculating how to bring their outlays, for living and retiring, into alignment with their incomes.
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But eventually many people decided: This is no fun. Instead, let’s disconnect enjoyable spending decisions from tiresome facts about resources, thereby living the way the federal government does.