When Risk Aversion Becomes an Economic Problem

[Cgrexp]

At the same time, encouraging people to spend more isn't necessarily the answer, especially when that spending is driven by debt. So where is the balance? Is the problem really that people are saving too much, or that too much of those savings aren't finding their way into productive investment

To keep the economy running, it is important to maintain a balance between income-expenditure-savings. If this balance is broken, it will also affect the country's economy. Since expenditure is more than income, the economy will naturally go down. Even if there is excess income compared to expenditure, it will affect the economy very badly, inflation will continue to increase and will also affect the production system. If everyone keeps saving excessively, then businessmen will have to be dependent on exports, which is not a positive aspect for the country's economy.

Farmers will face losses due to lack of buyers, businessmen will have to save due to lack of buyers and due to the decrease in money circulating in the market, the government will be forced to print more money, which will result in an increase in inflation. That is, even if any one of income, expenditure and savings becomes unbalanced, it can cause inflation and weaken the economy.

A healthy balance between income, expenditure and savings is important. If we spend more than we earn, debt can increase. At the same time, financial stress can arise in the long run. If everyone saves more than they spend, consumption demand can decrease, which will affect market conditions. Excess savings do not necessarily mean inflation. If savings are converted into investments, that money can be used to create businesses, production and employment. Similarly, if excess money is used for productive investment, it can strengthen future growth. If there is an effective balance between consumption, savings and investment, money flows, production and employment increase and the economy remains relatively stable.

[SUPERSAIAN]

This balance can be achieved. The important thing here isn't just how much people spend. Simply encouraging people to spend more and increasing unnecessary consumption will only keep businesses afloat temporarily. People will make unnecessary purchases up to a point; this is unsustainable.

Moreover, if such an increase in consumption creates demand that doesn't correspond to production, it can further fuel inflation in the long run. Therefore, the real issue is not to push people to spend at any cost, but to create a climate of trust, ensure that savings are transformed into productive investments, and ensure that spending corresponds to real needs.

[M47AK16]

The problem is that, savings no longer safe again after a long while, and savings no longer build business too any longer. When were little, an investor can use 2-3 years and then save for investment where the plan will be done without obstruction or economic destruction on the amount saved. Nowadays, you only build business with the amount that comes in big at once because savings no longer does it anymore.

You could still do that, but you can't "only" save; you also have to invest that at the same time as well. I do not care what you are investing in, as long as it is providing some good return; you could invest in Pokémon cards, all I care, I do not mind that, just gotta put it somewhere decent. Most people end up with mistakes because they end up with wrong moves, and for that reason they end up with something not that great at all.

If you only save and put that as a fiat on the side, and put it in a savings account and get like 3-4% a year from it, then you are going to get poorer. If you do that, then it is a bad idea, and you are not going to make a profit from it. A reasonable approach would be that if you do invest in what you have at any given moment, then you should be doing something a lot better. In that case, putting some aside and then buying bitcoin with it and doing it for many years would mean that you are going to get richer. If you do that and get as many bitcoins as you can and save aside, then of course eventually you are going to end up with enough money to retire as well.

You may not be able to only save, but without saving you get nothing. You are right that saving is a big part of the plan for the future, but not everyone can save as well. I am not going to tell you all my life story and try to sound like, " Oh, how bad things are for me and all that, screw that. But I can tell you that I have spent 5 years doing terrible and everything has been shit for me. I have grinded as hard as I can, and I mean 5 am hospital cafe hard work at times as well; thankfully, those days are gone, but it happened, I grinded, and now I am here. But I have no savings to show for it, or at least very little, not enough to mention. That is why I would say that not everyone has a chance to save, and they need all the money they can get.

If you gave me a thousand dollars today, and I mean like free of charge, not a loan or anything, just a free thousand dollars, I would not be able to save all the thousand; for example, I would put some aside for sure, a couple hundred, but I would instead pay off my loans with the rest, hell maybe with all. This is why I do not think that we should look at what we have as a privilege, but we should not ignore the chances life gives us if we are capable of saving, because not everyone can.