Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Yes, but framing it as "if people should save more ..." supports the neoclassical model in which fundamentals establish the equilibrium level of output and a "saving" decision plays an active role in setting the interest rate.

The next round effect of the decision is the loss of spending, both in terms of a reduction in exogenously financed consumer spending and a reduction in the propensity to consume out of income. So the consequential dimension of the decision is the decision to cut back on spending.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Aug 27th, 2008 at 05:35:43 PM EST
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