The Paradox of Thrift

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Hi yall,

I have been in personal finance circles for decades now. One of the key pieces of advice is to save money and cut your spending. That for the most part is good advice to a certain extent. However things start to change when people in society start to save money on a mass scale. The Paradox of Thrift described by John Maynard Keynes says that reduced consumer spending can cause economic activity to slow during a recession.

I know people like to say dont buy lattes every day but the economy could be hurt if everyone did that. I am a big-time cheapskate and the country would likely be in a permanent depression or recession if everyone in America had my spending habits. I remember back in the day millennials were bashed for "killing" whole industries like the golf industry and beer industry. Many times we did not go to those kind of places like Applebee's or Red Lobster because we were not paid well enough because of lack of strong labor unions and stagnating wages not that we did not hate those places.

I think during Covid American personal savings rates were between 20 to 30 percent or so and now its prolly less than 10 percent. Part of the reason is because our economy shifted from a War Time Industrial Economy to a peace-time Booming consumer society where most consumer spending comes from debt. This really exploded in the 80's and and 90's with credit cards and large shopping malls everywhere. One area where the Paradox of Thrift falls short is that it doesnt account for savings in bank acccounts being used by bank to lend money out to consumers through fractional reserve banking. I guess the forms of money that the Paradox of Thrift apply the most to are gold and silver and copper that money is just out of the banking system at that point. The Paradox of Thrift was a major reason for the stimulus checks. Research has shown that the presence of Dave Ramsey broadcasting in a media market results in reduced consumer spending in that market.

I need to eat out more at local restaurants to put some money into the economy.
Locally owned places that treat their workers decently.

Ya I try to support local mom and pop places now...It was one of my New Year's Resolutions. If eating or shopping local is not an option I try to support a regional chain instead of a giant national or international brand. However in my experience its the big box places and the big chains that can afford to pay decently.

I try and buy British goods where available.

Thats nice...What kind of goods are those?

Food mainly, and ecig juice.

The last British goods I've bought were a set of non-stick crumpet rings.

Very few Australian made goods. Yes mainly food/wine.

Saw a Chinese comedian in Melbourne at a comedy festival, mostly Aussie crowd, she remarked "Oh! Looks like I'm the only thing in this room that's made in China", (audience laughs) "along with the tables, chairs, glasses, clothes, shoes, umbrellas and bar decorations

I don't spend much on anything. My largest expenditure is for Medicare.

My Social Security goes entirely into investments.

My largest expense is for health insurance as I'm not eligible yet for Medicare.

Some of my clothing is made in the USA.

I'm on a Plan F Medicare Supplement plan. Unfortunately for new Medicare users, Plan F is no longer offered, but if you already have it, you can keep it.

What it trades is a higher monthly cost for a much lower maximum cost. If things get serious, I'll be far ahead with Plan F. It costs approximately $2,000 per year but covers pretty much everything other than elective procedures and with no deductible. In other words, my total out of pocket costs, except for medications, is the yearly $2,000. The closest to it available now is Plan G which is very similar but I think it has an initial deductible to go through.

Most of my relatives have a Medigap plan. These are much lower out of pocket, but the maximum costs can be much higher than with Plan F (or Plan G). Also, I don't need approval to have treatment. If you are on a Medigap plan, it isn't covered if some nameless person at the Medigap company doesn't approve the treatment. This has caused some serious issues for some family members by severely limiting their options.

Also, a Medigap plan limits coverage to those doctors affiliated with the plan. That might work in a city (I don't know) but where I live, it doesn't work out well. In my very rural area, I don't know that any doctors are affiliated with a Medigap plan. Being on Plan F, I never have to worry about having to find a doctor or a medical facility affiliated with the plan. I think that something that is not an absolute emergency (gall bladder surgery, for example), I can generally have the surgery and be recuperating in less time than it takes my relatives to get the surgery approved.

Actually by being extremely Thrifty . Have been able to afford that occasional coffee out .. And spend extra money on healthy ingrediants to make meals with. Making for alittle better health.

Wasn't Keynes the main economy philosopher that promoted the use of government intervention thru stimulus during economic downturn in order to keep the economy healthy?

I think so. I heard he gave input to the FDR about how to navigate the Great Depression using lots of government intervention. Also I think the more recent stimulus checks including Obama's years ago were inspired by Keynes.

What always surprised me was the number of people who would trade in their car every year for a new car. That's a sucker move.

My current car is a 2015 Ford. I bought it in 2017 and it works fine. I really don't drive much (the furtherest I've been from home in twenty five years is about 200 miles). It had about 20,000 miles on it when I bought it and it is now up to about 65,000 miles. So that works out to around 5,000 miles per year.

I paid cash.

One mistake that I did make was not buying a Ford Transit Connect van while they made them. All the used ones I look were used in business and are pretty beat up from drivers who didn't treat them well. Also, they are no longer in production.

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Another way to save a lot of money is to learn to do your own cooking. Fortunately, in my rural town, the only reason to go to any of the local restaurants is for the convenience. Their food is not very good. I had the catfish plate at the cafe on Friday and it was downright pitiful. They used to serve a decent chicken fried steak, but the last time I ate that there, it was rather pitiful, too. And their barbecue is the worst I have ever seen. Their sliced brisket is bad and shouldn't really be called barbecue and their chopped brisket is nothing but fat.

Not only that, they don't post any prices at all -- you don't know what you are being charged until you pay for it.

Years ago when I lived in another area, I used to have a running Indian buffet at home. There was a local Indian grocery where I could get most anything I needed. Every day I would cook enough of one dish to last about four or five days. So my daily meal would consist of rice, a chicken curry, and a couple of sides such as channa masala and a curried vegetable (often either potatoes or okra). And I'd get the naan from the local Indian grocery.

I'm seriously considering doing something like that now. I'm still trying to decide what cuisine to concentrate on, but it will probably be Mexican. I might make it more eclectic by mixing it up a bit -- how does shrimp etouffee with Mexican fried rice and beans on the side sound?

Anyway, if you cook your own food, depending on how fancy you want to get, you can get by pretty good for $2 or $3 per meal. It's not unusual for me to fix a baked potato with butter for lunch.

Saving a few hundred a month on car payments and a few hundred on food really adds up.

I'm only really thrifty when it comes to my food shopping

I'm actually guilty of not paying too much attention to where things are coming from when I shop online but maybe I should start paying attention

There are certain areas of my city that are like little economies on their own and these areas are absolutely thriving

I love it