General Glut - Post-Keynesian

Post-Keynesian

Some Post-Keynesian economists see the cause of general gluts in the bursting of credit bubbles, particularly speculative bubbles. In this view, the cause of a general glut is the shift from private sector deficit spending to private sector savings, as in the debt-deflation hypothesis of Irving Fisher and the Financial Instability Hypothesis of Hyman Minsky, and locate the paradox of thrift in paying down debt. The shift from spending more than one earns to spending less than one earns (in the aggregate) causes a sustained drop in effective demand, and hence a general glut.