We regularly hear how important consumer spending is for the economy. The story goes like this:the more consumers spend,the more money circulates in the economy, which contributes to healthy job growth and profits. Keynes, a British economist,went as far as to say that individuals saving their money may actually be hurting the economy. Sounds troubling, doesn't it? Fear not. You aren't actually hurting anyone else by saving money. Strong economic growth only comes from one place:savings. Not consumption. In fact,economic activity should not be mistaken for economic growth. For example,somebody takes their money, walks into a store, and purchases goods. The store increases its _ . But what happens to all of those goods and services that people have chosen not to consume by saving their money? Simple:Other people are allowed to consume them. Think of it this way:When you lend out your savings, you are actually saying,"Here, I am not going to consume right now, so why don't you?" Banks simply play the middleman:they collect lots of people's savings and then lend out lots of funds. It takes an unbelievable amount of goods and services to construct a building. It takes food, shelter, and entertainment for all of the workers, as well. Without savings,it is quite impossible to finance such a construction. The coordination between savings and consumption is a necessary basis for sound economic growth. This coordination is also why consumer lending (say , to borrow a big sum of money to buy a car) is not productive,in a strict sense. It doesn't increase the net   amount of wealth of an economy. Those savings could have been used to construct, say, factory equipment. None of this means consumption and spending are "bad" things. They simply do not make us wealthier. After all, the final goal of production and savings is to consume. But to say that consumption is the engine of economic growth is to put the cart before the horse. Or, to rephrase: the consumption of wealth can never make you wealthier. Happier, perhaps. Wealthier, no. What would be the best title for this passage?
The Saving Behavior of the Economy Consumption:a Key Concept in Economy Consumer Spending and Economic Growth The Truth about Savings and Consumption