One of the more amusing paradoxes that surfaces up in textbook economics is known as the 'paradox of thrift,' which occurs when one person engages in a financial beneficial action, but has negative consequences when the whole country does it. For instance, let's say that, going into the 2008 recession, I had $20,000 in debt. When the economy tanked, I got spooked, and vowed to never get into that type of poor fiscal health again. Like a responsible adult, I kept my vow in 2010 and 2011 as the economy slowly but surely began to improve. Instead of going out and increasing my purchases, I use my excess disposable income to pay down my debt and improve my finances.
This is perfectly logical, smart, and leads to long-term financial security. But what if an entire country engages in this practice? The economy needs consumers to spend money in order to grow, and if consumers are paying down their debt instead of enjoying fancy meals and luxury goods, then it hampers economic growth, employment, wage increases, etc. It seems incredibly counter-intuitive that being responsible with your money doesn't add to the country's growth, but it doesn't matter. Getting in a position where you are no longer suffering from bone-breaking debt is the most important goal, and if that means it takes you longer to contribute to the GDP, then so be it.
Wall Street Daily recently put out a good post on this very subject: http://www.wallstreetdaily.com/2011/06/24/investment-news-in-perspective/ .
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