Paradox of Thrift

16 Feb 2018 - Ian Birch - 3 minutes

Paradox of Thrift

Here at CashMaster, we spend a lot time discussing how to minimise financial waste and avoid over spending on unnecessary items.  We are certainly not alone and the trend of spending less is growing as people grapple with rising living costs.  I have some friends who get really excited when they manage a ‘zero-dollar day’.  This usually involves eating only home grown food and drinking home brew by candle light which is not as dull as it sounds.

Being frugal can be very rewarding and as you become good at it, your attitude to the rampant ‘consumerism’ we wade through every day changes and you begin to focus on the more important things in life. If we think of our finances as a bucket full of holes, our income is trying to fill it while our spending is trying to drain it. Plugging those holes by being more careful with our spending means the bucket fills sooner.

So now to the ‘paradox of thrift’ as popularized by renowned economist John Maynard Keynes.  His theory goes something along the lines of when consumers respond to a worsening economic climate by spending less, they actually contribute to the economic slow down because they are adding to the restriction of money flow.

Not everyone agrees with Mr Keynes with non-Keynesian economists claiming that increased savings mean the banks can lend more, thereby putting downward pressure on interest rates and increasing economic activity. This theory neglects the fact that banks tend to be much stricter with lending in tough times.

Anyway, CashMaster isn’t about starving the economy of liquidity, it’s about helping everyday Aussies become better managers of their own finances.  It’s about ending expensive spending mistakes through better financial awareness.  It’s about selfishly putting you and your loved ones first.  Read more about how it does this here and subscribe to get our budgeting tips and story's delivered straight to your inbox.

Ian Birch

Ian Birch

Digital Media Manager

I love a good story and I love sharing good stories with others. The Evermore Money Management story is as good as it comes and spreading the word about the people behind it, the developments taking place within it and the runaway success it is becoming, is my dream job.