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General Forum: Society | | "SAVING IS SIN, SPENDING IS VIRTUE" | |
| how does America solve its trade deficit ?
Secondly ,what entices an ameircan consumer to spend ?culture differences untayi ,kaani the basic necessity to spend should be there and how come the dollar is stronger than the rupee or the yen ?
Capital markets lo America is very much strong and thats why ,it can afford trade deficits and yet be strong enough ,thats my reasoning .
It would be superficial to ju look at the savings point of view and jump to a conclusion .
Posted by: Mr. Pit and the Pendulum At: 29, Jul 2005 11:08:26 PM IST
The article is interesting.
I read few years ago 'An average American has already spent what he is going to earn in the coming 3 years!' - something like that.
I also remember the joke of a very poor relative of ours, when he was asked
'How are you getting sleep when you have so many loans?'
Pat came his reply -
'It is the money-lenders that should not get sleep. Not me!'
What a beautiful economics!
Posted by: SATYA RAMA PRASAD KALLURI At: 29, Jul 2005 6:22:56 PM IST
"SAVING IS SIN, SPENDING IS VIRTUE"
Japanese save a lot. They do not spend much. Also Japan exports far
More Than it imports. Has an annual trade surplus of over $100 billions.
Yet Japanese economy is considered weak, even collapsing.
Americans spend, save little. Also US import more than it exports.
Has An Annual trade deficit of over $400 billion. Yet, the American economy
Is considered strong and trusted to get stronger.
But where from do Americans get money to spend?
They borrow from Japan , China and even India . Virtually others save
For The US to spend. Global savings are mostly invested in US, in dollars.
India, it keeps its foreign currency assets of over $50 billions in US
Securities. China has sunk over $160 billion in US securities. Japan's
Stakes in US securities is in trillions.
Result:
The US has taken over $5 trillion from the world. So, as the world
Saves for the US , Americans spend freely. Today, to keep the US consumption Going, That is for the US economy to work; other countries have to remit $180 Billion every quarter, which is $2 billion a day, to the US ! Otherwise The US economy would go for a six.
So will the global economy. The result will be no different if US
Consumers Begin consuming less.
A Chinese economist asked a neat question. Who has invested more, US?
In China or China in US? The US has invested in China less than half of
What China has invested in US? The same is the case with India. We have
Invested In US over $50 billion. But the US has invested less than $20 billion
In India.
Why the world is after US?
The secret lies in the American spending, that they hardly save. In
Fact they use their credit cards to spend their future income. That the US
Spends is what makes it attractive to export to the US ? So US imports more
Than what it exports year after year.
The result:
The world is dependent on US consumption for its growth. By its
Deepening Culture of consumption, the US has habituated the world to feed on
US Consumption. But as the US needs money to finance its consumption, the World provides the money.
It's like a shopkeeper providing the money to a customer so that the
customer keeps buying from the shop. If the customer will not buy, the
Shop won't have business, unless the shopkeeper funds him. The US is like
The lucky customer. And the world is like the helpless shopkeeper
financier.
Who is America 's biggest shopkeeper financier?
Japan of course. Yet it's Japan which is regarded as weak. ModernEconomists complain that Japanese do not spend,
so they do not grow. To force the Japanese to spend, the Japanese government exerted it self, reduced
The savings rates even charged the savers. Even then the Japanese did not
Spend (habits don't change, even with taxes, do they?). Their traditional
Postal savings alone is over $1.2 trillions, about three times the Indian
GDP.
Thus, savings, far from being the Strength of Japan has become its
Pain.
Hence, what is the lesson?
That is, a nation cannot grow unless the people spend, not save. Not
Just Spend, but borrow and spend. Dr. Jag dish Bhagwati, the famous
Indian-born economist in the US told Manmohan Singh that Indians wastefully save. Ask them to spend, on imported cars and, seriously, even on cosmetics! This will put India on a growth curve.
"Saving is sin, and spending is virtue." Before you follow this neo economics, get some fools to save so that you can borrow from them and spend.
I am sure some of you will agree or have some more expert comments.
Posted by: Mr. manoopuli At: 29, Jul 2005 5:50:32 PM IST
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