How should we save the economy? Save more money and hope our financial thriftiness saves us, or spend more money and hope borrowing can fuel consumerism?
The London Times suggest that spending is the way out of this. Both The British and United States Governments are doing everything they can to discourage savings right now. Other then publicly announcing that they don’t want you to save.
“borrowing our way out of debt”, paradoxical as it sounds, is exactly the right prescription for our present problems.
In the article Kaletsky says:
The next logical step, although it may be politically controversial, would be to do the opposite of what the Tories suggest. Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets – or simply to save less and consume more.