When Americans Save, They Are Stimulating

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John Tamny RealClearMarkets

Amid the U.S. economy’s continuing struggles, conventional wisdom has suggested that Americans must spend in order to bring the economy out of its slump. Along those lines, a recent newspaper beamed the words, "Hard-Hit Families Finally Start Saving, Aggravating Nation’s Economic Woes." The paradoxical nature of such a headline presumably lost on the paper’s sub-editor.

The problem with today’s presumed economic wisdom is that it has no basis in reality. Simply put, no act of saving, short of an individual putting money under the proverbial mattress, can ever detract from consumption.

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