Lead:

To some extent, the more frugal the public, the lower their consumption and the more they save, the more it will lead to a decrease in the overall social income. Because in a given income, consumption and savings move in the opposite direction, that is, if consumption increases, savings decrease, and when consumption decreases, savings increase.

In 18th-century Europe, there was a popular story like this:

A swarm of bees squandered in pursuit of luxury, and as a result, the colony quickly flourished. Later, due to the change of queen bee, the bees changed their habits, gave up their luxurious life, and instead advocated frugality, which led to the decline of the entire bee society, and finally fell to the fate of being defeated by the enemy and fleeing.

This story is about the "logic of frugality", which is known in economics as the "frugal paradox". The trend of "waste and merit" that it preached was severely criticized at the time, and the work was judged by the court at the time to be a "scum work that obstructs public hearing" and is considered to be the cause of the corruption of the social atmosphere. However, more than 200 years later, the British economist John Maynard Keynes was inspired to propose the "paradox of frugality".

How to interpret this paradox? As we all know, frugality is a virtue. Theoretically, frugality is the most common way for individuals to accumulate wealth. From a micro point of view, a family can often get rich by being thrifty, reducing waste, and increasing savings.

However, those who are familiar with Western economics know that, according to the Keynesian theory of determining national income, changes in consumption will cause changes in national income in the same direction, and changes in savings will cause changes in national income in the opposite direction. However, according to the theory that changes in savings cause changes in national income in the opposite direction, increasing savings will reduce national income and cause economic recession, which is evil. And it is good that reducing savings will increase national income and make the economy prosperous.

In fact, there is a paradox here: to some extent, the more frugal the public, the less they consume and the more they save, the more it will lead to a decrease in the income of society as a whole. Because in a given income, consumption and savings move in the opposite direction, that is, if consumption increases, savings decrease, and when consumption decreases, savings increase.

Therefore, savings and national income show an opposite direction, with an increase in savings and a decrease in national income, and an increase in national income.

According to this view, an increase in consumption and a decrease in savings will lead to an increase in national income by increasing aggregate demand, which will lead to economic prosperity; Otherwise, it will lead to economic depression. From this, a logical contradiction can be drawn: moderation of consumption and increased savings will increase personal wealth, but it will reduce national income and cause depression.

Thrift is a traditional virtue of the Chinese nation and a way for individuals to accumulate wealth. If a family is thrifty, less wasteful, and more saving, then the family can often get rich. From an economic point of view, thrift is about saving more and reducing consumption and investment.

In fact, this is just a general situation, there are exceptions to everything, and from a personal finance perspective, saving may not be the best way to get rich. Let's understand through the following story.

Once upon a time, there was a rich man who cherished his money, and he buried his gold under a big tree in the garden, and every few days he had to dig it out and intoxicate himself. Suddenly, one day, someone discovered his secret and stole the gold he had hidden under the tree, and the rich man was tormented by this. Later, his neighbors came to see him, and when they found out what had happened, they asked him: "Have you never spent all this gold?" ”

"No, frugality is a tradition in our family, and I just look at it every time." He replied. When the neighbors heard this, they laughed and said to him, "According to your way of dealing with gold, it is the same to you with or without gold." If you still feel bad, bury some more stones under the big tree and store them as gold. The neighbors were gone, leaving the rich man standing under the tree in a daze, thinking about the stolen gold.

Instead of hiding the gold with fear, it is better to use it to make money and gain more wealth. Hiding and idle wealth is equivalent to waste, and from the perspective of modern financial management, the "frugality" of the rich man can indeed be called "modern evil".

However, it should be noted that not advocating frugality does not mean that we should be overly extravagant and overly advanced in consumption.

Although the consumption pattern of advanced consumption and high debt can allow people to obtain consumer goods early, it also contains high-risk factors that cannot be ignored. The deep-seated reason for the outbreak of the subprime mortgage crisis in the United States lies in the fact that "consumption ahead of time" and "eating too much food" have overdrawn the potential of economic development. In the United States, it is common to spend ahead, whether it's a house or a car, a credit card or a phone bill.

Due to the American consumer culture and the encouragement and connivance of the American financial institutions to the consumption pattern of advanced consumption and high debt, many low-income people who do not have enough income to repay the loan can also buy a house through subprime loans. Subprime loans are home loans in the U.S. to people with low credit scores, lack of proof of income, and heavy debt. The result of this practice is that the subprime mortgage crisis in the United States has become bigger and worse.

In the two years from 2004 to 2006, the Federal Reserve's 17 large interest rate hikes finally punctured this huge and glorious subprime mortgage bubble, and the U.S. mortgage market gradually entered a recession stage.

The sharp rise in repayment interest rates and the fall in housing prices have caused the default rate of the subprime mortgage market in the United States to rise sharply, and this has dealt a fatal blow to the subprime mortgage market in the United States and the investment banks and financial institutions that have invested a large number of subprime mortgage debts, and on April 2, 2007, the bankruptcy of New Century Financial Corporation, the second largest mortgage company in the United States, means that the subprime mortgage crisis has officially erupted. All of a sudden, Wall Street, the United States, as the world's most powerful economy and the world's financial center, was full of panic and rumors.

In short, if domestic demand is insufficient, commodities cannot be sold, and the business conditions of enterprises will inevitably deteriorate, then they may face the risk of unemployment or wage cuts at any time, which will lead to a sustained economic downturn. However, not advocating excessive frugality does not mean blindly advocating consumption, but conforming to the consumption habits and concepts of Chinese residents. Only by adhering to the principle of "timely consumption" and making the growth of consumption levels and the conditions provided by social reproduction conform to the objective requirements of their development can we ensure the sustained, rapid, and healthy development of the national economy.