Wishing You Good Fortune

I am blessed by the fact that I have a relatively decent Chinese restaurant nearby that happens to deliver. I eat there quite often, and my only complaint is that their menu isn’t very diverse (but perhaps I’m a victim of discrimination?).

In any case, upon opening my fortune cookie tonight, I was greeted with this:

You shouldn’t overspend at the moment. Frugality is important.

That’s correct, my fortune cookie is promoting pro-cyclical behavior. I assume that there are people who monitor trends in the economy, and write corresponding “folk wisdom” fortune cookies that correlate with them…or perhaps it is never wise to overspend? Is there any time when it is not wise to be frugal?

I would imagine that if you are above 85% certain that your long-term income trend level is going to increase, and the marginal utility of present consumption is greater than increased savings prior to this event then it would, ceteris paribus, not be wise…but I could be wrong.

Update: This post illustrates what is referred to as the “paradox of thrift”. This paradox doesn’t “really” exist. While the “paradox of thrift” looks like a causal factor in the spiral of recession, what the economy is actually experiencing is deflation caused by monetary disequilibrium.


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