The Biggest Economic Threat Today

It’s Not What You Think [The Daily Reckoning] December 22, 2022 [WEBSITE]( | [UNSUBSCRIBE]( The Biggest Economic Threat Today - The economists’ war against economics… - Is consumer spending really 70% of the economy?… - There can never be too much savings… [*** NEW PUBLISHER ANNOUCEMENT IS LIVE…]( I’ve failed you. Because according to our records… You still don’t have our most profitable research service… Which means you’ve been missing out on gains like: - A 128% return in 28 days… - A 174% gain in 11 days… - And a 203% return in 26 days… So to correct my mistake… I’m reopening this opportunity for a limited time. But please, don’t wait. I’ve put a hard deadline on this. And I want to make sure you get in. [Go Here Now]( Annapolis, Maryland December 22, 2022 [Brian Maher] BRIAN MAHER Dear Reader , The stock market absorbed a vicious whaling today. Yet our central concern is not the stock market. Our central concern is rather the economists’ war against economics. It is a war nearly all mainstream economic schools of thought wage. It is a war against savings… and prudence. The individual saver is not necessarily an agent of Satan, concedes the economist of Keynesian leanings. Under limited circumstances some modest savings may be indulged. But if the entire nation tied down its money in savings? All species of economic calamity would ensue. The Evils of Savings If all saved a savage cycle would feed and feed upon itself... until the economy is devoured to the final crumbs. Consumption would dwindle to near-nonexistence. GDP would collapse in a heap. Waves of bankruptcies would wash through. All of this because the recalcitrance of savers. They refuse to untie their purse strings — and spend for the greater good. This paradox of thrift is perhaps the mother myth of economists in the Keynesian line. Yet no paradox exists whatsoever. Today we maintain that saving is an unvarnished blessing, at all times, under all circumstances. Before we thunder in defense of savings, let us first plunge a stake through the squirming heart of another economic myth: The myth that consumer consumption constitutes 70% of the United States economy... Lying Statistics Much of what goes under the banner “consumer spending”... is not in fact consumer spending. It is government spending. Medicare and Medicaid, for example, are included. Meantime, official GDP calculations do not include tremendous piles of economic doings. These piles include business investment and spending on “intermediate” goods. These of course are inputs required for the production of final goods — hence intermediate. They must first come in before consumer goods can go out. The steel in the automobile, the sugar in the candy, the wood of the furniture… these are intermediate goods. [Urgent Notice From Paradigm CIO Zach Scheidt!]( [Click here for more...]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a complete, step-by-step plan to surviving and beating inflation… one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings. [Click Here To Learn More]( Consumer Spending Is Only 30% of GDP? Yet their purchase does not classify as consumer spending — else they would be double-counted in the ledgers. Explains economist Mark Skousen: GDP only measures the value of final output. It deliberately leaves out a big chunk of the economy — intermediate production or goods-in-process at the commodity, manufacturing and wholesale stages — to avoid double counting. Now mix in expenditures on intermediate goods. What do we find? We find that consumer consumption only constitutes perhaps 30% of GDP. Skousen: I calculated total spending (sales or receipts) in the economy at all stages to be more than double GDP... By this measure — which I have dubbed gross domestic expenditures, or GDE — consumption represents only about 30% of the economy, while business investment (including intermediate output) represents over 50%. We might add that Americans purchase heaps of foreign goods. These purchases add little to the gross domestic product. Perhaps consumer spending accounts for less than 30% of GDP. We speculate of course. We have not interrogated the figures. We now revisit our central claim — that saving is an unvarnished blessing, at all times, under all circumstances. Remember Say’s Law “From time immemorial proverbial wisdom has taught the virtues of saving,” wrote Henry Hazlitt 74 years ago, “and warned against the consequences of prodigality and waste.” But to the anti-savers... prodigality and waste are near-virtues at times as these. They have forgotten their Say's law — perhaps purposefully. Say’s law holds that supply creates its own demand. "Products are paid for with products," argued Jean-Batiste Say over two centuries ago. Production must precede consumption. Here we return to an example we have previously cited… The Baker and the Shoemaker One man produces bread. Another produces shoes. Let us say the baker bakes a baker’s dozen — 13 loaves of bread. He consumes two of them. The remaining 11 loaves represent his savings. He can peddle them for other goods: shoes in our little example. Meantime, the cobbler cobbles together 13 pairs of shoes. He requires one new pair for himself. He further sets aside two pairs for his growing children. This fellow “consumes” three pairs of shoes, that is. The remaining ten constitute his savings. Like our baker, he can exchange his savings for goods. To proceed… Buying Is Actually a Form of Barter The cobbler who requires bread for his dinner appears before the baker. And the baker who must clad his feet comes before the baker. They may transact in money — direct barter is primitive. But upon closer examination we see their transactions in fact constitute an indirect barter. Money merely throws an illusory veil across the transactions. Ultimately the baker purchases his shoes with the bread he has baked. And the cobbler purchases his bread with the shoes he has cobbled. That is, each has paid for his items through savings. Concludes Monsieur Say: Money performs but a momentary function in this double exchange; and when the transaction is finally closed, it will always be found that one kind of commodity has been exchanged for another. What is more, the goods a man acquires through savings sees him through… and allows him to produce more loaves, more shoes. We must conclude that there can be no excess of savings. Savings equal stored wealth. To argue that savings injure society is to argue that wealth injures society. And savings spring from production. [Lightning is striking right now… and you still have a chance to save your retirement during this new recession…]( [Click here for more...]( Do you really think the worst of the stock market crash is over? … or is the real plummet still ahead? Whatever happens, there is good news… With an investment that’s different from stocks, bonds, or real estate… You can take advantage of lightning striking… … and you might pocket 8,788% gains. [Click Here To Discover How]( “Lack of Demand” Yet the enemies of savings turn Say’s law upon its head. They sob not about a lack of production but a “lack of demand.” That is, they place the wagon cart of consumption before the draft horse of production. The government must race the printing press to make the shortage good, to furnish the lacking demand. But no new production accompanies the flood of money. The additional money merely chases the existing stock of goods. It is the pursuit of alchemy, of lead into gold, of the free lunch. It is the half-conscious belief that the print press is the spark plug of prosperity. It neglects production. “But what about times like these?” counter the author of the CNN article. “If everybody saved, the economy would collapse. Remember the paradox of thrift. If government doesn’t step in and spend, who will?” But the old dead economists argue there is no paradox whatsoever… No Paradox of Thrift What applies to the individual applies to society at large, they insist. What is society but a collection of individuals, after all? If saving during depressed times is such a vicious economic crime… how has any economy gotten back up? The standard logic assumes all such economies corkscrew down and down into oblivion. Yet as history demonstrates abundantly, they recover. As we have also explained before… When society saves in lean times, it is not eliminating consumption — it is merely delaying it. The demand that is supposedly lost is not lost at all. It is simply shifted toward the future. Today’s savings are therefore tomorrow’s spending, tomorrow’s consumption. By reducing consumption today… society allows greater consumption tomorrow. Or according to Hazlitt: “‘Saving,’ in short, in the modern world, is only another form of spending.” Someone please tell an economist... Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Editor’s note: For the past few days, our customer support team has been working nonstop with new members to upgrade their accounts with Jim Rickards’ [CIA-based timing tool…]( We’ve never seen anything quite like this… and we couldn’t be more excited for what’s to come. We’ve been flooded with calls from Jim’s followers because they don’t want to miss out on what’s happening this week. They’re making an [exciting change to their accounts...]( A simple upgrade that will give them the information they need to trade faster, and stronger than ever before. Hundreds of Jim’s followers have already locked in this upgrade. Have you done it yet? Unfortunately, you could miss out on this upgrade once we hit our deadline, which is [tonight at midnight.]( [Click here now to discover how to upgrade your account immediately.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Brian Maher] [Brian Maher]( is the Daily Reckoning's Managing Editor. Before signing on to Agora Financial, he was an independent researcher and writer who covered economics, politics and international affairs. His work has appeared in the Asia Times and other news outlets around the world. He holds a Master's degree in Defense & Strategic Studies. 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