Ah, our old pal Lord Keynes and his paradox of thrift.
From the Los Angeles Times, October 24:
TAIPEI, Taiwan — China’s 1.4 billion consumers once spent with enough abandon to help drive the global economy. Now one of the hottest topics on Chinese social media is how to save money.
“The main thing is just not to starve to death,” one video blogger advised in a post detailing how she subsisted on snack samples and free meals from temples and student canteens.
Another has gained a following in reviewing children’s meals that adults in Shanghai can eat on the cheap. “This is so economical,” she marveled over a $1.80 dinner. “They also included fried chicken.”
Other accounts tout $8 gym memberships and the merits of waiting for sales at fast-fashion clothing stores.
The tips appear to be working, as household savings have hit record highs. But experts say that’s bad news for the economy, because widespread scrimping is contributing to a dramatic slowdown in growth this year.
While the bigger factor is a worsening real estate downturn, which has eroded demand for commodities and diminished a crucial vehicle for household wealth and investment, economists say China’s economy is unlikely to recover without a rise in domestic spending.
Hou Muhan, a 28-year-old modeling agent living in Shanghai, used to borrow money from her parents every month to cover her bills.
But this year, after they started asking her to pay them back, she began tracking her expenses and became much stricter about spending at bars or trendy restaurants.
“I noticed every time I exceed my budget it’s usually because I go for drinks,” she said. “Socializing usually costs money. This is something hard to avoid in Shanghai.”
Now she mainly cooks at home. On the rare occasions when she orders in, she divides the rice into three portions, freezing two to eat with other meals at home.
Chinese consumers are going through a “consumption downgrade,” according to an analysis of mobile payment data by Shanghai Pulse Data Technology Co.
At the beginning of last year, a typical Chinese lunch customer spent between $1.40 and $1.70 on a meal. By the end of July, that range dropped to $1 to $1.30 as many diners stopped ordering their noodles with pork in favor of egg or vegetables....
....MUCH MORE
Here's a scary picture:
I have to imagine that ten years later people cross to the other side of the street to avoid this gang.
Previously on thrift, September 2022's:Saving For Retirement, Zvi Bodie, and Keynes' Paradox
Following on the somewhat doomy and gloomy message of yesterday's "Who's Ready for a $5,814 Social Security Benefit Cut?" and "The Labor Shortage Will Get Worse and May Last for Decades" the rational reader might decide to heed the admonition of John Wesley, which we usually present in the context of being preferable to the split purpose found in ESG investing:
"Earn all you can, Save all you can, Give all you can"
—John Wesley Sermon 50, The Use of Money (1744)The problem is, if everyone does it, defers spending, the economy will go into a depression.
So with Wesley thundering in our ears we visit William Bernstein at The Efficient Frontier, 2003. First though, our introduction to a 2010 piece that referenced Bodie v. Bernstein:...
And many others.
