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Partly as a result, savings — known in economics as deferred consumption — have fallen steadily for more than 30 years, from a high of nearly 12 percent of income.
A $100,000 investment is $100,000 of deferred consumption by someone, somewhere.
The result will be deferred consumption and firms laying off workers; that is, unless output is offset by rises in the trade sector (i.e. more exports).
Deferred consumption, money not spent, is the textbook definition of capital.
More recent and less intuitively obvious work, shows a positive relation between deferred consumption and happiness.
He also said there was no evidence of "deferred consumption" - in other words, people putting off purchases in the belief that prices could fall further, a potential threat to economic growth.
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It is certainly the case that, as countries become wealthier, there is greater willingness to defer consumption by paying insurance contributions or taxes.
If this is "self-reliance," it does not sell well to those who believe they still possess a viable economy, financial assets, the ability to save money and defer consumption until it can be paid for.
It is an honourable aim, but a mistaken one.The inevitable crashFinance is a brain for matching labour to capital, for allowing savers and borrowers to defer consumption or bring it forward, for enabling people to share, and trade, risks.
Countries with PAYG schemes could raise taxes now, reducing the deficit and thus the debt burden on the younger generations.We want it nowBut more savings or higher taxation now would require those currently at work to defer consumption.
The returns on capital have been falling for centuries, perhaps because people are less impatient (thus willing to accept a lower price for deferring consumption) or maybe because society has become less risky.As well as low bond returns, future equity returns are likely to be lower than investors have become used to.
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CEO of Professional Science Editing for Scientists @ prosciediting.com