Paradox of Thrift

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Paradox of Thrift
Planning of a person’s future is critical in the current world as the future events cannot be predicted. Therefore, it is deemed necessary to make prior arrangements so that in case of the worst in the coming days, life still moves on. For instance, for an employed person, saving is necessary during the working period before retirement so that the amount saved can be of use when not working. The importance of this is that it makes the consumer maintain the same level of consumption even after losing or retiring from work.
With such a mindset, increased savings will result in little money in circulation in the economy thus making the interest rates high. In addition to that, one person’s conservation in the economy is another person’s income hence the levels of consumption are likely to differ significantly. Savings is high during an economic boom because most people are earning a decent salary and the rate of money circulation is high. The effect of such savings at such a time is that the government finds it difficult to implement its projects as people are not willing to trade with the money earned (Haight 534). In the economic recession, the savings are low since people have to spend the savings accumulated on the consumption process.
I do not agree with the assessment that increased savings have adverse effects on the economy since this is only in the short-run. In the long-run, however, increased savings means th…