tag:blogger.com,1999:blog-2098432983500045934.post5566762840147511078..comments2024-03-12T22:19:32.339-04:00Comments on The New Arthurian Economics: Zig, Zag, ZigThe Arthurianhttp://www.blogger.com/profile/16501331051089400601noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2098432983500045934.post-51676914148081253402010-07-13T18:56:03.408-04:002010-07-13T18:56:03.408-04:00Thanks, JB. I was pretty happy myself with that &...Thanks, JB. I was pretty happy myself with that "raw material" sentence. But I had half an idea the other day, and your comment brings it to the fore: "What isn't saved can't be available for investment."<br /><br />True enough... but if one dollar is saved, it can be used to create ten or twenty dollars of new loans. So how can it be that there's not enough money available to lend for investment?<br /><br />Half an idea, as promised.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-52533178637812879302010-07-13T13:36:43.837-04:002010-07-13T13:36:43.837-04:00I like the take on Savings as the raw material for...I like the take on Savings as the raw material for finance. What isn't saved can't be available for investment.<br /><br />The best examples of living this creed are the Asians, who live within their means and the powerful outcome is a society that can build industrial capacity in the short-term because its people don't spend.<br /><br />Now I guess some like the Thais have a predilection to spend on imports, so we can't generalize. The Chinese however have been excellent savers. Rather than go through banks, their source of loans is actually predicated on multi-generational family support. So maybe the nuclear family and its transient needs have shaped our financial system--great for banks and consumption but hardly as solid as family savings. Why? the reason isn't purely financial: the Chinese can lean on family members, work in their shops and stores, etc.. The more recent <i>Western</i> financial crisis has been one of employment; non-traditional investment systems may encourage greater stability (although the Chinese will be increasingly vulnerable to the business cycle as they industrialize and families nuclearize.)<br /><br /><br /><br />Your "Word with Linda" post attests to the absence of money to spend, I'd add a supporting idiom: you can't have your cake and eat it too.<br /><br />I know it's a trite expression, but it expresses an absolute: that which is spent isn't saved. Now if investment is spending in the end, well, then, that supports consumption, which would appear on the surface to have an impact not dissimilar from simple consumption based on borrowing, a highly consumerist lifestyle. In the end though, investment dollars flow back to the initial investors, who are in the American case Chinese who lend to our financial entities or Fedgov. Who benefits? The investor should, and can build wealth over time. The spender only gains the transient benefit of buying something. This is good, yes, and provides paramount sustenance--or so marketers would have us believe--but the spending is hardly sustaining. In this respect, spending could be viewed as <b>not</b> investing for the future, or a rainy day.<br /><br />The profiting investors (more and more often Chinese) gain the benefit of interest over the debt, which can generate additional income, savings, and investment, an increasing portion of which stays in China. Which system is better--saving or consuming? Well. every economy needs both and as it turns out saving is the gateway to investing which encourages spending, unless of course the gov't crowds out more productive investment in favor of squandering its spending on things like the war machine, which tend to be inflationary and not much of a spending multiplier. Or savings could go into huge gov't pools like in Japan, and languish at low rates of return, doing nothing to bolster growth.<br /><br />And there's the vital issue of the debt governments incur if they don't tax enough (or spend beyond their receipts.) Government spending deprives people of the fruit of their labor, money which would almost invariably be better invested and spend if it <b>weren't</b> liberated by the tax man. Gov't borrowing goes a step farther, securitizing future tax receipts and burdening future taxpayers with interest on past debt, an odious practice in times of relative prosperity.jbpeebleshttps://www.blogger.com/profile/11386620564536871255noreply@blogger.com