[arcticbull]

> Yes, that is exactly it. The economy falls apart if everyone saves too much. Money is an imaginary number designed to facilitate separation of labor, if too many people save and retire early then there won't be enough people working.

Yes, this I recently learned is called the paradox of thrift. [1]

[1] https://www.investopedia.com/terms/p/paradox-of-thrift.asp

[imtringued]

It's not just the paradox of thrift. The general concept is the paradox of competition. There are macroeconomic statements that always apply but as individuals optimize their local statements they actually end up "deoptimizing" the global statement. Basically a race to the bottom or a continuous form of the prisoners dilemma. In other words, the idea that local decision making will always reach a global optimum, the very foundation of free market economics, isn't even true in theory given our current money system.

See this in the case of Greece vs Germany. Germany is trying to boost exports by cutting back on imports. If Greece would retaliate by following the exact strategy there would be less trade between them overall. Meanwhile if both countries tried to boost imports, then both of them would be better off.

How exactly does Germany do it? The government is simply enacting policies to destroy the bargaining power of labor. Yes, Germany is trying to compete with Greece based on labor costs. It's trying to pass off a questionable economic policy that destabilizes the eurozone as strength because of moral attachments to export industries and saving money while blaming the other side for importing its products and borrowing to pay for them. This is why the eurozone is a failure and every country should have its own currency.

https://en.wikipedia.org/wiki/Paradox_of_competition

[eru]

Yeah, it's not actually real.

The central bank can always just keep printing enough money to keep nominal GDP stable, if they want. No matter how much people want to save.

[arcticbull]

They can’t actually, GDP is a function of supply and velocity. If you increase supply and it’s saved, velocity drops commensurately. This yields no change in nominal GDP.

[eru]

In that case, just keep printing money and buy up all assets in the world.

[arcticbull]

You clearly misunderstand. That's not what you proposed initially. Doing so would also not have an impact on GDP. Everything in moderation, as they say.

[eru]

I said originally that they can print money.

Sorry, that was a bit sloppy. When we say that eg the Fed prints money, we mean that they buy assets with newly created money.

Typically that asset is government debt. But they have been known to buy other stuff as well. And if they run out of government debt to buy, and nominal GDP still hasn't picked up, they can keep buying up the rest of the world.

Just to keep in mind: real GDP = nominal GDP - inflation.

Printing money like isn't expected to do much for real GDP.