I'm simply making the statement that saving is a zero sum game. Is it or is it not? If not, then Keynes and the paradox of thrift are not even "theoretically possible" which you seem to say is at least possible although most implausible....Pointedstick wrote:No. I reject that logic. That something could theoretically exist does not in any way imply that its theoretical conclusions are applicable to an environment that does not share any of the assumptions that make the theory applicable.doodle wrote: So in other words, the paradox of thrift exists but doesn't manifest itself because of our profligate ways? But if the paradox of thrift could theoretically exist then that must mean that savings is a zero sum game.
Paradox of Thrift
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Re: Paradox of Thrift
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Re: Paradox of Thrift
Savings are a zero-sum game within the conditions of a completely closed system.doodle wrote:I'm simply making the statement that saving is a zero sum game. Is it or is it not? If not, then Keynes and the paradox of thrift are not even "theoretically possible" which you seem to say is at least possible although most implausible....Pointedstick wrote:No. I reject that logic. That something could theoretically exist does not in any way imply that its theoretical conclusions are applicable to an environment that does not share any of the assumptions that make the theory applicable.doodle wrote: So in other words, the paradox of thrift exists but doesn't manifest itself because of our profligate ways? But if the paradox of thrift could theoretically exist then that must mean that savings is a zero sum game.
Savings are not a zero-sum game outside the conditions of a completely closed system.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
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Re: Paradox of Thrift
Is the Earth a closed system?
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Re: Paradox of Thrift
Im not trying to be a jerk PITA btw....
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Re: Paradox of Thrift
Yes. So it is true at a global level, but not true at every sub-global level--that is to say, it is not true for every country, state, city, town, person, etc. This phenomenon is even acknowledged by Keynesians, and is referred to as "exporting your way out of a recession."doodle wrote: Is the Earth a closed system?
But as soon as we colonize other planets, then it will be the universe that's the closed system.

Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
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Re: Paradox of Thrift
Isn't a fiat money system technically a negative sum game? If you take a $10 loan to buy a haircut at a 10% interest rate and pay it back one year later, you actually owe $11.doodle wrote: If I take out a 10 dollar loan to buy a haircut from you I haven't really created $10 dollars because I have a liability now that cancels out that money that I just conjured up.
This blew my mind the first time I read it.
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Re: Paradox of Thrift
Nope. Even that is not zero-sum, as it reduces prices for everyone else.Xan wrote: If you're talking about stuffing wads of cash under a mattress, then maybe that's a zero-sum game. Most saving is in other forms.
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Re: Paradox of Thrift
My understanding is that every dollar in existence is created from a private debt.
This is all just off the top of my head but I can only think of two private parties that can take on debt. Businesses and individuals.
As long as the businesses continue to expand their debt and in turn create dollars, all individuals could save more dollars than they earn.
If all businesses and individuals stopped taking on debt, wouldn't all dollars be extinguished?
The assets would still exist but the medium of exchange would be gone.
This is all just off the top of my head but I can only think of two private parties that can take on debt. Businesses and individuals.
As long as the businesses continue to expand their debt and in turn create dollars, all individuals could save more dollars than they earn.
If all businesses and individuals stopped taking on debt, wouldn't all dollars be extinguished?
The assets would still exist but the medium of exchange would be gone.
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Re: Paradox of Thrift
No some dollars(The ones that you can hold in your hand), is printed without an agreement of repayment. You have to separate between cash and credit, they are very different things. As long as the economic wheels are turning, all debt can be repayed by circulating the cash.
Last edited by lordmetroid on Fri Jul 17, 2015 12:28 am, edited 1 time in total.
Re: Paradox of Thrift
Since you mentioned MMM, here's his opinion the topic: http://www.mrmoneymustache.com/2012/04/ ... me-frugal/doodle wrote: So are you saying that the paradox of thrift doesn't exist or can't exist? It seems possible that everyone could decide to jump on the MMM bandwagon and start saving 80% of their income....stop buying cars, stop going out for drinks and dinner etc. etc.... If that happened I along with everyone else in my city would lose our jobs and thus wouldn't be able to save anymore. So it seems that there is some connection between spending and saving? No?
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Re: Paradox of Thrift
I thought dollars were "created" whenever the federal government decided to spend money (via the fed) which could then make its way into the private sectorwhatchamacallit wrote: My understanding is that every dollar in existence is created from a private debt.
This is all just off the top of my head but I can only think of two private parties that can take on debt. Businesses and individuals.
As long as the businesses continue to expand their debt and in turn create dollars, all individuals could save more dollars than they earn.
If all businesses and individuals stopped taking on debt, wouldn't all dollars be extinguished?
The assets would still exist but the medium of exchange would be gone.
"There’s nothing wrong with Harry’s portfolio—nothing at all—but there’s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."
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Re: Paradox of Thrift
Thanks for the references! I'll definitely check these outTennPaGa wrote:Not exactly. Money is created when (i) the federal government deficit spends and (ii) banks issue loans.sixdollars wrote:I thought dollars were "created" whenever the federal government decided to spend money (via the fed) which could then make its way into the private sectorwhatchamacallit wrote: My understanding is that every dollar in existence is created from a private debt.
This is all just off the top of my head but I can only think of two private parties that can take on debt. Businesses and individuals.
As long as the businesses continue to expand their debt and in turn create dollars, all individuals could save more dollars than they earn.
If all businesses and individuals stopped taking on debt, wouldn't all dollars be extinguished?
The assets would still exist but the medium of exchange would be gone.
Upthread, I referenced a post in Cullen Roche's Pragmatic Capitalism blog. You might enjoy poking around there, and in particular, taking a look at some of his posts in the "Education" area. He's put alot of work into understanding how the U.S. monetary system operates. Also, he's uploaded a paper to the Social Sciences Research Network that consolidates alot of what he has on his blog. It's long, but well worth the effort, IMO.
Understanding the Modern Monetary System
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Re: Paradox of Thrift
No, every loan or credit is OFFSET by a corresponding asset or liability. It's net neutral, but the overall wealth pie grows larger.doodle wrote: But every loan or credit is cancelled out by a debt or liability.
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Re: Paradox of Thrift
No it just means you're choosing not to borrow down the line when you save. Without borrowing, the money supply won't expand. Zero sum implies no one wins. If anything, saving is a negative sum game to the real economy. Don't conflate saving with investing though (real investment, not purchasing "savings certificates" on the secondary markets).doodle wrote: So in other words, the paradox of thrift exists but doesn't manifest itself because of our profligate ways? But if the paradox of thrift could theoretically exist then that must mean that savings is a zero sum game.
Last edited by MachineGhost on Thu Oct 01, 2015 10:48 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!