What Is Good For You Is Bad For The Economy

Opinion: (Eitan Avriel, Managing Editor, themarker.com): “In everyday life, one’s logic usually works perfectly well. If a person or family consumes above their ability and gets into debt, the correct cure for this will be reducing consumption and debt.

“The logic works in the opposite direction as well: If a person wants to succeed but doesn’t have money, he has to get a credit from banks or investors, fight the markets, and try to realize his dream, mercilessly beating his competitors.

“However, when it comes to macroeconomics, this logic ceases to work and often gives opposite results. A bank will usually have not more than 10% of the money it has to return to its customers, and if all the clients ask for their money back, it won’t be able to cope with this situation.

“In macroeconomics, if all citizens who are in debt decide to decrease their living standards, reduce their consumption, and liquidate their liabilities, the whole economy will find itself in a heavy crisis. Demand will decrease, companies will close, employees will be made redundant, the demand will go further down, and this vortex will suck down the whole economy. What works …on a personal level becomes a trap on the level of economy.

“This also works the other way around: If the public decides to take out a loan and spend the money, the economy will develop for a limited period of time. But the debts will rise, prices will go down, bubbles will burst, banks will secure their assets, and we will be back to the 2008 crisis scenario. What makes you happy isn’t always good for your economy, and thus isn’t good for you too. It’s strange and non-intuitive, but true.

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The Economy For Unified Humanity
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Global Economy: Is Anybody In Control?

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