[ExI] A world drowning in excess savings

Wed Feb 19 02:08:25 UTC 2020

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

SR Ballard

*I am with you. Maybe it's because psychology makes sense and economics
doesn't.  bill w*

On Tue, Feb 18, 2020 at 7:47 PM SR Ballard via extropy-chat <
extropy-chat at lists.extropy.org> wrote:

> 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
>>> <https://nl.nytimes.com/f/a/wYgdD2PUMsxBtVmzEysORg~~/AAAAAQA~/RgRgLqRLP0T1aHR0cHM6Ly93d3cubnl0aW1lcy5jb20vcmV1dGVycy8yMDIwLzAyLzE2L3dvcmxkL2FzaWEvMTZyZXV0ZXJzLWphcGFuLWVjb25vbXktZ2RwLmh0bWw_dGU9MSZubD1wYXVsLWtydWdtYW4mZW1jPWVkaXRfcGtfMjAyMDAyMTgmY2FtcGFpZ25faWQ9MTE2Jmluc3RhbmNlX2lkPTE2MDc3JnNlZ21lbnRfaWQ9MjEzODEmdXNlcl9pZD0yNGZkOGU4NTE5YWM1YmFjYmFmZGEzNjY5MWU1ZDdhYyZyZWdpX2lkPTY3OTAzMTQ5MjAyMDAyMThXA255dEIKACFLH0xejjM6JFIUam9obmtjbGFya0BnbWFpbC5jb21YBAAAAAA~>
>>> : 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
>>> <https://nl.nytimes.com/f/newsletter/ftrNxB8mhPPuFUPSkFM7fA~~/AAAAAQA~/RgRgLqRLP0TYaHR0cHM6Ly93d3cubnl0aW1lcy5jb20vMjAxMC8wNy8wMi9vcGluaW9uLzAya3J1Z21hbi5odG1sP3RlPTEmbmw9cGF1bC1rcnVnbWFuJmVtYz1lZGl0X3BrXzIwMjAwMjE4JmNhbXBhaWduX2lkPTExNiZpbnN0YW5jZV9pZD0xNjA3NyZzZWdtZW50X2lkPTIxMzgxJnVzZXJfaWQ9MjRmZDhlODUxOWFjNWJhY2JhZmRhMzY2OTFlNWQ3YWMmcmVnaV9pZD02NzkwMzE0OTIwMjAwMjE4VwNueXRCCgAhSx9MXo4zOiRSFGpvaG5rY2xhcmtAZ21haWwuY29tWAQAAAAA>,”
>>> 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
>>> <https://nl.nytimes.com/f/a/4X_9ycAWUcV1W2vepJNdyg~~/AAAAAQA~/RgRgLqRLP0TeaHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9tYXJrZXRzL3JhdGVzLWJvbmRzP3NyZWY9cXp1c2E4YkMmdGU9MSZubD1wYXVsLWtydWdtYW4mZW1jPWVkaXRfcGtfMjAyMDAyMTgmY2FtcGFpZ25faWQ9MTE2Jmluc3RhbmNlX2lkPTE2MDc3JnNlZ21lbnRfaWQ9MjEzODEmdXNlcl9pZD0yNGZkOGU4NTE5YWM1YmFjYmFmZGEzNjY5MWU1ZDdhYyZyZWdpX2lkPTY3OTAzMTQ5X3BrXzIwMjAwMjE4VwNueXRCCgAhSx9MXo4zOiRSFGpvaG5rY2xhcmtAZ21haWwuY29tWAQAAAAA> 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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