Krugman To Consumers: Yes, You're Broke, But We Need You To Spend

Paul Krugman examines the dismal consumer spending numbers in Q3 GDP and invokes the “paradox of thrift.” 

What’s that?

Consumers are flat-out broke, and we’re finally beginning to understand that. So we’re finally cutting spending. But, in aggregate, the more we cut spending, the more broke we’re going to get–because the economy will suffer, asset values will drop, and many of us will pay cuts or get fired.

So what we really need, Krugman says, is for all of us to spend, spend, spend for just a little while longer to reinvigorate the economy…and then gradually, carefully, slow our spending and replenish our nonexistent savings while the economy sputters along.

But Krugman’s not an idiot. He knows that will never happen. So he once again stumps for the next best thing. MASSIVE fiscal stimulus, probably in the form of grants to bankrupt states and infrastructure spending.

See Also:
Can’t Deleverage Our Way Out of THIS Debt Mountain
What Does “Deleveraging” Really Mean? Vaporizing $25 Trillion of Debt

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at