¶ … Paradox of Thrift: ____ ____ ____ ____ ____ talks about how the global economy has been acting in somewhat unpredictable ways within the last year. As national economies work more and more together (becoming more integrated), the economies of individual countries are gradually being more influenced by the economic forces around the world. He predicts difficult times ahead if adjustments aren't made soon. He uses John Maynard Keynes' work for explanations and warns that countries must work cooperatively to achieve a balance of saving and spending that will allow economies around the world to remain stable.

According to Wolf, the problem is that people around the world are saving too much money and not returning enough of their income to the economy, causing a global savings glut. The difficulty is that high savings leads to high fiscal deficits. This view contradicts what Americans have been told over the last few years: that social security's ability to support our elderly population is finite, and that with the expected explosion in numbers of retired people, social security will eventually not be able to handle the load. The president has urged Americans to save more for their own retirement and wants to privatize part of social security. Whether this is a wise plan or not, it encourages people to spend less and save more, because most people have a finite amount of money. If they are going to save more, they must spend less.

In addition, Americans have traditionally believed that making investments in stocks, bonds and other long-term programs is good for the economy. In theory, that money goes to work supporting economic expansion.

However, the effects of other countries cannot be ignored. Japan is one of the largest economies in the world today. In Japan as well, people are saving more and spending less, resulting in a surplus of saved private funds and an accompanying fiscal deficit for the country. The same thing is true in the Euro-market, another huge part of world economy.

Another significant factor is that of emerging markets. As the people in those countries grow more affluent they may also save a larger portion of their expanded income than they have in the past. We have become an economic global village, and we will all have to work together on our "village's" economic health.