Suze Orman – Paradox of thrift
Guy’s wife calls, concerned about her hub. wanting to buy a $1200 kayak. He’s been saving a portion of his paycheck for seven months, and carries the money around in cash.
1. PoT – Suze denies req., and tellds them to contribute to emergency fund
2. By doing so, they are making a good personal/family decision
3. But, since virtually everyone is now saving, and thereby also bypassing a purchase, the real economy suffers a demand shortage
4. However, Suze’s advice is actually good for them if one considers it outside the context of the demand shortage that this kind of saving on a mass basis creates
5. Also, they’ll be saving for their emergency fund at a negative interest rate, considering inflation.
6. But if they choose to save via a stock market investment, and the PoD enabling demand shortage continues on a national basis, they might well lose a good deeal of their investment, since, as a demand shortage continues, the price of equities will drop.
