Saving makes more cents than spending

Spending our way out of a recession is a theory most farmers have difficulty getting our heads round.

Those of us who survived the ag-sag of the 80s are haunted by memories of interest rates going above 20% and have no intention of jeopardising our businesses and the jobs of our staff  by spending any more than we have to.

We are mindful that when we stop spending the impact is felt beyond the farm gate. The money from the dairy boom flowed into towns and now the white gold rush is over, the people who service and supply us are losing business.

The ODT reports  that Humes in Alexandra have made 15 staff redundant because of a fall in demand for the water troughs and cattle underpasses they make.

That’s a lot of jobs in a small business in a small town but none of the dairy farmers I’ve spoken to are in the mood for the sort of expansion which would generate the demand to provide work for those people.

When money is tight saving makes more cents – and sense – than spending.

3 Responses to Saving makes more cents than spending

  1. Sally says:

    And this government gives taxpayer money to the Dunedin Stadium!

    God only knows what National’s principles are. They certainly don’t believe in free enterprise as they only pay lip service to this principle.

    I am sick of reading feeble excuses for their shocking decisions that it was a ‘political’ decision. Politics must no longer come into the equation.

    Aren’t these people meant to be there for what is good for our country not making shonky decisions just because they want to be elected next round?

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  2. Farmer Baby Boomer says:

    You are quite right HP.A tight rein on the cheque book(and efpos,internet payments etc) is the policy most of us think makes most sense at the moment.
    I dont aggree with the overall tone of Sally’s comment but like her I do have questions about the stadium contribution.Have National put this under the heading of ‘infastructure’ spending? I guess it will help the Dunedin economy by giving work to sectors that are struggling to find work but I wouldn’t put it in same category spending ‘quality’ as, say, an irrigation dam in one of NZ’s drier areas or roading improvements that will help transport effciency.
    I am interested in hearing your thoughts on this issue, HP.

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  3. Mark Hubbard says:

    The fact is government can’t spend our way out of recession, indeed, the multiplier effect they think exists – that is, government spending leads to economic growth by a factor greater than 1 – is purely mythical: if we could grow the economy in this way then why doesn’t the government spend a trillion dollars an hour – we’ll all be driving around in Merc’s. I don’t think so 🙂

    The problem is Western politicians, and economists, have for a very long time been ‘sucked in’ by Keynesian economics (which is Marxism without the hairy beards). Particularly they have become mired on the devastating reefs of what they refer to as the ‘paradox of thrift’ – that is, spending is good, savings are bad. It’s pure down on the farm BS.

    This very good article gives a pretty good brief on that, quote:

    Perhaps the single most destructive tenet of Keynesian economics was its denigration of saving. Keynesianism has been used to justify wasteful spending, massive deficits, and one after another scheme to redistribute wealth from those who would save it to those who would spend it.

    In keeping with this anti-saving doctrine …

    Though that is a pretty long article. More locally, Bernard deals with this on his blog post and video here.

    In fact the reality of markets works in entirely the opposite direction, to quote my own comment on Hickey’s thread:

    “But most particularly, on the level of theory, one of the fundamental assumption errors with this Keynesian notion – of spending – is that consumption leads to production. It does not. Production leads consumption, and production is dependent on savings.”

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