The Underconsumptionist Solution for Economic Depressions Calls for a Reduction in the Amount of Saving and a Stimulation of Consumption by Issuing New Money

Foster and Catchings, inflationists popular in the 1920s, denounced the capitalist system as inherently deficient because consumers do not have the means to buy the goods they produce, "for every dollar which is saved and invested, instead of spent, causes one dollar of deficiency in consumer buying unless that deficiency is made up in some way." As recommended by Foster and Catchings, that "way" was to issue new money-credits to consumers. E. F. M. Durbin summarizes the underconsumptionist attack on savings as follows:

Saving is a peculiarly dangerous and self-defeating process, for it withdraws money from the purchase of finished commodities and makes their production less profitable, while at the same time it seeks to set up still further capital resources with which the production of finished commodities is to be increased. It is this paradoxical process which makes a deficiency of purchasing power inevitable. It increases the supply of and diminishes the demand for the products of the industrial system to the point at which production cannot be continued any longer with profit and at that point crisis and depression begins. Hence depression can always be prevented and relieved either by reducing the amount of saving or by stimulating consumption by the issue of new money.

--Mark Skousen, "Keynes and the Anti-Saving Mentality," in Dissent on Keynes: A Critical Appraisal of Keynesian Economics, ed. Mark Skousen (New York: Praeger Publishers, 1992), 90.