Saving is counterintuitive? The paradox of thrift

Late last year, Malacanang urged Filipinos to tighten their belts some more by saving money and being more thrifty. The monetary authorities embarked on initiatives to promote financial learning that aim to promote a culture of savings. Early this year, a monetary board member urged Filipinos to strengthen their personal finances and help the economy by saving more in banks.

Global consumer confidence is down and a local survey shows consumers see buying conditions in the next quarter less favorable, as the Filipinos’ spare cash is primarily intended for savings. Overseas remittances are seen to go flat this year, and in the first four months of the year, US remittances actually went down. Households have to curtail their spending. Filipinos become more prudent and cautious. In fact the IMF has said that Philippine households showed significant increases in savings rates, thereby cutting domestic demand. Is the government's plea to save now heeded?

But wait! Jollibee and SM are getting worried. Now economists warn us saving at this time will not do us any good. Contrary to what intuition or common sense would indicate, saving now will do us more harm. How is this going to happen?

From Wikipedia: "The paradox of thrift (or Paradox of Saving) is a paradox of economics propounded by John Maynard Keynes. The paradox states that if everyone saves more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth."

Old school economics say that since what was saved was later invested, there could not be excessive saving. But later Keynes asserted that thrift is virtuous only up to a point. If we increase the proportion of income we save, the reduced expenditure on goods will lower total demand in the economy. Thrift is laudable up to the point businessmen in the economy wish to borrow our savings for investment.

A former NEDA chairman and the monetary authority share the sentiment that further precautionary saving will worsen the country’s current economic conditions.

What happened to their pontifications that frugality is good for our families and the economy? It took a receding economy to be an eye-opener for us to be wise with our money. This is a natural reaction to our increased awareness of our fragile economic state.

But is it going to be a problem?

Why do big business and government authorities want us consumers to fuel economic growth?

Big business and government must also do more to help the economy along. What good is growth if it is not spread among the many? Make sure that the stimulus package is not siphoned off by greed. Be satisfied with moderate growth profits. Please moderate the greed.

Michael has left the building

The Philippine newspaper Philstar cannot resist using the headline "MJ beats it" and the accompanying picture showing him beating it. The layout is even punnier in the print edition.

The viral video of the Cebu inmates dancing to MJ's Thriller enjoys renewed success. It had 23.6M+ views last Saturday and it had an additional 1M+ views overnight. It is viral twice over. Now, the prison is a tourist destination as tourists flock to watch them dance.

MJ had financial troubles lately. But with a resurgence of interest in his body of work, his estimated $400M in debt can be easily wiped off. If he were alive today, he'd be laughing his way to the bank. Like Elvis, who also enjoyed similar renewed public interest after he died, rumors will arise that MJ faked his own death so he can enjoy his life without his every move scrutinized. MJ sightings will be reported, and the new catchphrase will be "Michael is in the building". This is expected in a world grieving because "Michael has left the building".

David vs Gloria-wrath

I tweeted yesterday that I wish I was from Pampanga so I can vote for Randy David and deny Gloria a chance to re-enter politics. Some on Facebook liked it and wished the same. On twitter, some even want to transfer to Pampanga so they can actually vote for the professor. The response to David's intention to run is overwhelming. This early it should give an indication to Gloria that the people want her out. But the Palace factotums are determined to fight, they say it is a David vs. Goliath. If the morally and intellectually formidable opponent in Randy David gets Gloria's goat, then it's more like David vs. Gloria-wrath. The irony here is that Randy David stands tall and stately at all of six feet while Gloria is a 4'11" fishwife on heels.

White Hair Chronicles III

Two more icons from my youth passed away. Michael Jackson, the sequined moonwalker, was more than an icon. He is the King of Pop. He of the supreme talent was also the supreme eccentric. He changed appearance from the little black boy with a very fine voice to a moonwalking, sequined, gloved one with lighter skin, noticeable nose job, and cleft chin. And notorious liking to entertain little boys, which disgraced him later in life. His catchy Don't Stop Til You Get Enough was adapted as the theme song of my favorite local sitcom John and Marsha, and that is what I will always remember from him. He also inspired 1,500 Cebu inmates to perform a synchronized dance to his Thriller number. The video of that performance is now a viral Youtube video.

Then, we also have the news of Farrah Fawcett's death. Though she has been in death throes for the past days, the news of her passing, together with that of Michael's, remind me that my generation is growing old. Farrah Fawcett was my hand-picked favorite among Charlie's Angels. Her poster was on my bedroom wall until Cheryl Tiegs burst into my consciousness.

Michael was 50, Farrah 62. They have projects lined up. Gone too soon. They will be missed.

Ammos for the gunless society campaign

Two gun recent gun related incidents should bolster the call for a gun-free society.

In Cavite, six people were killed in a shootout at a public market. Investigations show that the fight started from a petty traffic-related argument. The two drivers figured in a shouting match and threatened to kill each other. After a few minutes, armed backup from both camps arrived at the scene and they started shooting at each other. The patriarchs of the two camps died along with their sons.

In the other incident, a vacationing soldier died after being accidentally shot by his five-year-old son who was helping clean his gun in their home. The man sustained a gunshot wound on the left side of the body with the bullet exiting his right side, going through the front door and grazing his wife. The wife managed to rush the soldier to the hospital but he was declared dead on arrival.

Filipinos have an increasing passion for guns. Notice the many gun shops proliferating. Notice the many Pro-gun stickers. Advocates of a gunless society should be up in arms (figuratively, of course) against this development. If owning cannot be stopped by law, we should shoot for steps to promote responsible ownership.