Wednesday, December 3, 2008

We are finally saving more money

Everyone is talking about nominal prices, money supply, blah blah blah. Everyone says all we need is more money, just hoping we can take our economy somewhat back to where it was.

What I like about the Austrian folks is that they tend to talk more about the real economy. They talk about real prices, not just nominal prices. They note that the economy is trying to get to a new equilibrium, and that causes some pain. We need to save more, and that is what people are doing now. See the graph below. This will hurt. But we are heading in the right direction.

Look again at the graph below. Shouldn't we be punished for a zero savings rate?

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