[ExI] A world drowning in excess savings

SR Ballard sen.otaku at gmail.com
Wed Feb 19 01:45:06 UTC 2020

But Ramsey is right, honestly. The average consumer should avoid high interest debt, like credit cards or payday loans. I’m not against car and home loans, though he usually tells people to save for them. I agree with his preference for a 15 year fixed. Adjustable mortgages bring uncertainty to a budget. 

Is Dave Ramsey’s decision to get people to pay cash for cars and houses really killing the economy? Seems like economies did just fine back when people paid cash for those things. I don’t think that the entire economy should rest on interest payments. While money isn’t finite, it feels finite. How much of our “increased economy” is just inflation? 

“We’re making $10 million more this year! We’re up 3%! If inflation is three percent, then you’re just flatlined from last year. 

I don’t know how people figure these things out on a huge scale, but locally “the economy” is easy to see. If there are “help wanted” signs everywhere, things are going well and there’s a bustle of energy. If everything is dead and people are stressed, then the opposite.

In 2008 when everything popped, it was really hard on my family. But why exactly? What really changed. Like the tulip bubble ... nothing changed except for perception. People perceived the tulip to go up in value, then down. But really, the physical facts of things didn’t change one single bit.

Markets, I think, are probably the same. Trading stocks, short term, is basically “nothing”, it’s just timing perception. It doesn’t produce a product or service. It’s a non-thing. Yet it somehow has real consequences. I kind of... just don’t get it.

I have taken Economics classes and read a few books but the whole thing makes less sense to me than psychology.

SR Ballard

> On Feb 18, 2020, at 7:06 PM, Keith Veronese via extropy-chat <extropy-chat at lists.extropy.org> wrote:
> I won't rest until Dave Ramsey is in jail for this. 
>> On Tue, Feb 18, 2020 at 7:05 PM William Flynn Wallace via extropy-chat <extropy-chat at lists.extropy.org> wrote:
>> And the average credit card debt is around $7000.  Oversaving?  bill w
>>> On Tue, Feb 18, 2020 at 5:41 PM SR Ballard via extropy-chat <extropy-chat at lists.extropy.org> wrote:
>>> The economy is horrible all around the world because we are saving too much, yet, the average American has less than $400 in savings, and a large number are at risk of becoming homeless if they had an expense greater than $1000. Odd.
>>> Who is doing this “excess saving”? Rich people? Companies? Governments clearly aren’t, because, you know, deficits.
>>> SR Ballard
>>> 2020/02/18 17:27、John Clark via extropy-chat <extropy-chat at lists.extropy.org>のメール:
>>>> This is a interesting column by Nobel Prize winning economist Paul Krugman:
>>>> The latest numbers from Japan are in, and they’re terrible: In the fourth quarter of last year Japan’s economy shrank at an annual rate of 6 percent. And no, it wasn’t the coronavirus: we won’t see the negative effects of that shock until the next set of numbers.
>>>> But there’s nothing mysterious about Japan’s stumble. It was the result of an extremely ill-advised turn toward fiscal austerity, in this case taking the form of a hike in the value-added tax.
>>>> The thing is, nobody should have been surprised at this outcome. Over the past decade we’ve seen many, many experiments in fiscal austerity — raising taxes or cutting spending. And without exception the impact of fiscal tightening has been to shrink the economy. We’ve also seen a few experiments in deficit spending, most notably the explosion of the U.S. deficit under Donald Trump, and bigger deficits have consistently given the economy a boost.
>>>> So was fiscal responsibility always a terrible idea? No. It was never a great idea — claims that deficit reduction would produce a surge in private investment, which I once mocked as belief in the “confidence fairy,” were never supported by the evidence. But the world has changed in ways that make austerity policies more destructive than they used to be.
>>>> You see, in the past it was relatively easy to offset the negative effects of austerity with other policies: as nations tried to balance their budgets, their central banks — the Federal Reserve and its sister institutions — could help sustain the economy by cutting interest rates.
>>>> Today, however, interest rates are very low even when economies are strong — around 1.5 percentage points in the U.S., actually negative in much of Europe and Japan. So there’s little or no room to cut to offset the depressing effects of austerity.
>>>> But why are interest rates so low? The answer basically comes down to a global excess supply of saving: around the world, people want to save more than businesses are willing to invest in new factories, office parks, and so on. This leaves the world awash in savings that are all dressed up with nowhere to go, which is in turn a world in which bond markets are effectively begging governments to borrow and spend.
>>>> And governments should take them up on the offer. The sensible, prudent thing to be doing now would be to borrow at these low, low rates and use the money for public investment: rebuilding our creaking infrastructure, subsidizing new technologies (especially green energy), and making sure that children have adequate health care and nutrition.
>>>> Of course, we’re not doing that in America: the Trump administration is borrowing vast sums, but squandering the money on tax cuts for corporations and the wealthy. Yet even that is preferable to the behavior of governments that are still hung up on the notion that prudence means balancing the budget — and as we’ve just seen in Japan, seem unwilling to learn from the repeated disasters of austerity.
>>>> Now is the time to borrow and invest. But is anyone willing to do the obviously right thing?
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