Krugman clarifies the location of those excess savings…
As I said the other day, Mr. Krugman was saying that the economy was awash in excess savings. His words implied that the US was awash in excess savings. Then I said yesterday that the truth was in fact that the world was awash in excess savings.
Yesterday, Mr. Krugman clarified his point and said…
“And we are, as I said in a different context just the other day, in a world awash in savings, a world in which someone who decides to spend less and save more makes the whole world poorer.”
Even though he didn’t specify “world” the other day, he did now.
Gosh, has it been ten years already?
My term paper in Management, spring semester 2004, addressed the challenge of putting to use a bit of the cash that American corporations were stockpiling.
As much as I refuse to believe that I was the only one who could see this coming, it is distressing to read that we as a society are still arguing over whether this is a thing rather than pounding out an program of what to do about it.
Yeah, wouldn’t want to have enough for retirement, to buy that car, refrigerator, or whatever, right?
i have been saying this for years every since i read that “social security reduces savings.”
the sad fact is that even Krugman is a “striped economist” and can’t see beyond what they taught him in graduate school, or econ 101 as they say.
the whole world does not get poorer from excess savings, it gets poorer because people are trapped in econ 101 and can’t understand how to value leisure or distribute gains in productivity.
if it isn’t a plastic toy you can buy at Walmart, it isn’t important.
We need to remember what savings are. Simply, they are a collection of tokens with which one can mobilize the efforts of others. So, whoever dominates the ownership of these tokens, dominates the efforts of others.
“The online lender CashNet.com reported that of 1,000 people it recently surveyed, 22 percent had less than $100 saved in case of an emergency. Another 46 percent had less than $800 to cover unexpected expenses. Said Megan Staton, CashNet director of marketing, “The scarcity of rainy day savings remains a concern for too many Americans, and it hasn’t improved since last year.” [link below]
Now, I imagine that that an online lender is going to access a rather skewed population when they do their survey, yet this finding doesn’t conflict with what I know of my friends and relatives in the states.
Meanwhile the last I heard, businesses and financial instructions are sitting on $3-4 trillion. This has two advantages for them — on one hand, they have the leverage to direct the efforts of a huge number of people (or a few people, hugely), and on the other hand, the people have no leverage to use in return.
It is just as useful for business to hold extra savings, as it is for them to destroy the savings of the general public. Since 1980, they have accomplished both in spades. This difference in security and leverage, not nominal savings and equity, is the monstrous situation we find ourselves in now, and no mere business cycle is going to correct it.
yes, and part of the trouble is that people, especially economists, use the one word “savings” to cover (or ignore) a whole bunch of different things. Social Security IS savings, it’s just not the kind of savings that money people can make a profit on, nor is it “investment”, which is something that even “investment in the stock market” is not.
people need savings both for emergencies and for certainties (getting too old to work), but they need to protect their savings from inflation, and unfortunately the market which might protect them from inflation exposes them to other, bigger risks.
i like pay as you go, and i would prefer “unemployment insurance” be worker paid, pay as you go. this might be problematic because lots of people tend to unemployed at once, making pay as you go needed at exactly the time when incomes are down…but if the pay as you go was “insured” by government “borrowing” that could be worked out…
except of course for the politicians and economists screaming bloody murder about “taxes” and “deficits.”
thing is, even the liberals would have to learn that it may not be the case that either unlimited money can be generated this way, or that unlimited money is good for us. people can accept a great deal of “poverty” if that poverty only affects their ability to buy a new car and does not force them into slave wages and miserable housing and fear of starvation.
The world is awash in $ debt. Global Resource Bank – http://www.grb.net
“debt” is someone’s savings that someone else has borrowed.