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World Economy -Some Facts


JOYce
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World Economy -Some Facts

"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 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.

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, that 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. 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 its 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 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.

"Saving is sin, and spending is virtue."

Before you follow this neo economics, get some people

to save so that you can borrow from them and spend.

This is what US has successfully done in last few

decades.

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