Britain's are saving the least since the 1950s: Will there be an economic crisis?
Well there are two sides to this:
First, by saving less, people are obviously making more purchases which fuels economic growth. This is because businesses are making more money, they are in turn hiring more employees, these employees are then spending their money, etc. and the cycle continues and continues, fueling an economic expansion.
However, the downside of this is that no economic expansion lasts forever. With more people spending their money, there will be more people willing to buy certain products, and they will bid more money to buy products high in demand. This will causes the price of the product to rise and inflation will occur.
Inflation is very problematic because it will devalue the money supply and cause your money to lose value. If left unchecked, this problem will feed itself and ultimately hyperinflation will occur, meaning that prices will be so high that it will take barrels of money to purchase items like bread.
With hyperinflation, the economy will collapse and enter a severe recession/depression and then the economic crisis will have occured.
So yes, you can say that an economic crisis can occur but that is assuming that banks and the government do nothing to stop it. However, in the short term, this spending is healthy and means there is a prosperous economy!
Hope I helped!
I think everyone is saving the least. We are a society who wants things now rather than saving for them. We'd appreciate it more if we had to work and save for it but unfortunately that is not in our nature. We can just take out credit and have it right now. Sad.
according to Keyne's Paradox of Thrift, if the economy saves then the economy will be worst off because there will be a lack of funds for investments.
however, if theres a low saving rate then the interest rates might be high, thus investment activities might be slightly reduced. but on the overall, its still ok.
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