<P> Two caveats are added to this criticism . Firstly, if savings are held as cash, rather than being loaned out (directly by savers, or indirectly, as via bank deposits), then loanable funds do not increase, and thus a recession may be caused--but this is due to holding cash, not to saving per se . Secondly, banks themselves may hold cash, rather than loaning it out, which results in the growth of excess reserves--funds on deposit but not loaned out . This is argued to occur in liquidity trap situations, when interest rates are at a zero lower bound (or near it) and savings still exceed investment demand . Within Keynesian economics, the desire to hold currency rather than loan it out is discussed under liquidity preference . </P> <P> Third, the paradox assumes a closed economy in which savings are not invested abroad (to fund exports of local production abroad). Thus, while the paradox may hold at the global level, it need not hold at the local or national level: if one nation increases savings, this can be offset by trading partners consuming a greater amount relative to their own production, i.e., if the saving nation increases exports, and its partners increase imports . This criticism is not very controversial, and is generally accepted by Keynesian economists as well, who refer to it as "exporting one's way out of a recession". They further note that this frequently occurs in concert with currency devaluation (hence increasing exports and decreasing imports), and cannot work as a solution to a global problem, because the global economy is a closed system--not every nation can increase net exports . </P> <P> The paradox was criticized by the Austrian School economist Friedrich Hayek in a 1929 article, "The' Paradox' of Savings", questioning the paradox as proposed by Foster and Catchings . Hayek, and later Austrian School economists agree that if a population saves more money, total revenues for companies will decline, but they deny the assertion that lower revenues lead to lower economic growth, understanding that the additional savings are used to create more capital to increase production . Once the new, more productive structure of capital has reorganized inside of the current structure, the real costs of production is reduced for most firms . However, critics of the Austrian school argue that using accumulated capital to increase production is an act which requires spending, and therefore the Austrian argument does not disprove the paradox . </P>

The paradox of thrift highlights the idea that