Friday, December 24, 2010

'Saving is sin, and spending is virtue.'

What do you think about that?  After reading the article below, please follow me to find "some fools to save so that we can borrow from them and spend" !!!
Especially this season to be merry....Merry Christmas to all my Christian readers!!

Subject: Japan saves, America addictive cycle

Crazy logic?

Well, it makes sense......

A crazy world indeed!

Interesting article written by an Indian Economist

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 imports 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 itself 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.


The US has taken over $5 trillion from the world. So, as the world

saves for the US - Its The Americans who 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 !

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. Modern economists complain that Japanese do not spend, so they do not grow. To force the Japanese to spend, the Japanese government exerted itself, 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. Jagdish 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. This is one of the reason for MNC's coming down to India, seeing the consumer spending.

'Saving is sin, and spending is virtue.'

But before you follow this Neo Economics, get some fools to save so that you can borrow from them and spend !!!


bow said...

The problem here is no one want to lend money to China or India, lenders just don't believe they can recoup their investment and a higher possibility of losing all their loans compare to America. So 'Spending more' is a privilege not every country has due to various economies and political factors at play. lol....

bow said...

Lenders around the world will rather take the chance with America for its excessive spending habit, than with China defaulting behavior, it is a lot more secure to bet on a overspend borrower to pay his interests than rely on a overcaution saver not to default on his loan. The lender is alot smarter than you want to believe without the involvement of sin and virtue .


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