Comments on: Physical savings http://stephenmonrad.com/blog/economicsidea/physical-savings-2/ The blog is about alternative economics and the book I am writing about my economic ideas. Mon, 12 Apr 2010 04:35:30 -0700 http://wordpress.org/?v=2.8.6 hourly 1 By: Stephen Monrad http://stephenmonrad.com/blog/economicsidea/physical-savings-2/comment-page-1/#comment-265 Stephen Monrad Wed, 15 Apr 2009 19:22:06 +0000 http://stephenmonrad.com/blog/?p=187#comment-265 Eric. Good question. I don't think there is a simple answer for how people decide how much to save. I know that I don't really know how much money I should be setting aside for retirement. I don't know how much my savings will be worth when I retire. I don't know for sure what my needs will be when I retire. I don't even know if I will live to retirement age. Even the near term is difficult to manage. I don't know for sure how much money I am going to make over the next few years. Combining all this, savings decisions are really just guesses. Lots of things can influence how much I save. The problem is that some things affect a lot of people at the same time. A shock to the economy gets everyone worrying at the same time and causes savings to go up. For all I know, a successful ad by a mutual fund company might ramp up savings too. The answer isn't to try to affect how much people save. The answer is to find ways for the economy to respond effectively to the decisions people make. Eric.

Good question. I don’t think there is a simple answer for how people decide how much to save. I know that I don’t really know how much money I should be setting aside for retirement. I don’t know how much my savings will be worth when I retire. I don’t know for sure what my needs will be when I retire. I don’t even know if I will live to retirement age.

Even the near term is difficult to manage. I don’t know for sure how much money I am going to make over the next few years.

Combining all this, savings decisions are really just guesses. Lots of things can influence how much I save. The problem is that some things affect a lot of people at the same time. A shock to the economy gets everyone worrying at the same time and causes savings to go up. For all I know, a successful ad by a mutual fund company might ramp up savings too.

The answer isn’t to try to affect how much people save. The answer is to find ways for the economy to respond effectively to the decisions people make.

]]> By: Eric Monrad http://stephenmonrad.com/blog/economicsidea/physical-savings-2/comment-page-1/#comment-244 Eric Monrad Tue, 14 Apr 2009 20:19:10 +0000 http://stephenmonrad.com/blog/?p=187#comment-244 I'm having trouble understanding fully the cause of recessions. Is it as simple as "people saving more than they earn"? What triggers this to happen? If I look at individuals, people who are laid off suddenly lose their income - they don't keep their income but just decide to spend less. Of course, being laid off can be a result of a recession rather than a cause. What is the underlying cause that results in people saving more? Eric I’m having trouble understanding fully the cause of recessions. Is it as simple as “people saving more than they earn”? What triggers this to happen? If I look at individuals, people who are laid off suddenly lose their income – they don’t keep their income but just decide to spend less.

Of course, being laid off can be a result of a recession rather than a cause. What is the underlying cause that results in people saving more?

Eric

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