Monday, September 6, 2010

The Always Unhappy Economists

The Economists are always unhappy with the human behavior. Although they assume that the humans act rationally in financial matters but then when something goes wrong with that rationality they start to question that rational human being. Consider for example that during the time of pre-recession, they were lamenting that the people are not saving enough and indeed the saving at one time went to the negative. Now that some sort of normal behavior is being shown that of savings rate in excess of six percent, the economists are again complaining that this rate of savings is not conducive to the economy recovery. That people should start spending once more to help the economy.

Well they people are seeing the light (or at least they are) by trying to replenish what they have lost during this recession, a loss of home equity , reduction in the value of their 401K funds, lower stock values and a constant news about the state of the social security funds. Apart from this, they are also reading news about the state of the economy, locally and federally and they are scared about their future. Although I can understand that if people don’t spend, the companies cannot grow and hire more people but still people are scared about their jobs prospects and uncertainty about the economy so they are find it prudent to save as much as possible and until the uncertainty is somewhat removed or reduced, they will not spend.

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