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yajuvender
March 4th, 2003, 07:15 PM
Dear friends,

Lets try and find out astonishing economic fundas behind saving vis-a-vis spending.

- Yajuvender
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Savings as SIN ... Spending as VIRTUE
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The 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, that is Rs.5 lakh crores ... 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 billions, that is over Rs.20 lakh crores. Yet, the American economy is considered
strong and trusted to get stronger. Indeed a contrast. But where from do Americans get money to spend?

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They borrow from Japan, China and even India !! Virtually others save for 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 ...

The Result:
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The US has taken over $5 trillion from the world. Want to know it in rupees? Rs.2,50,000 crore crores! So, as the world saves for 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 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 us. We have invested in US over $50 billion. But the US has invested less than $20 Billion in India ... So why does the world run after US?

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The secret lies in the American spend, in 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:
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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 same shop. The customer will
not buy, the shop won't have business, unless the shopkeeper funds him. The US is like this lucky customer. And the world is like the helpless shopkeeper financier ...

Who is America's biggest shopkeeper financier?
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Japan !!! Yet it is 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 itself. Reduced the savings rates, even charged the savers ... even then the Japanese did not spend. Their traditional postal savings alone is over $1.2billions. that is. Rs.60 lakh crores, about three times the GDP of India. Thus, savings, far from being the strength of Japan, has become its pain ...

What is the lesson?
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That is, a nation cannot grow unless the people spend, not save. Not just spend, but borrow and spend. Dr.Jagdish Bhagwati, the famous Indain-born economist in the US, once told Dr. Manmohan Singh that Indians wastefully save. Ask them to spend, he said. On imported cars and, seriously, even on cosmetics! This, he counseled, will put India on a growth curve.
But like Japanese we Indians too are not obliging.

Modernists may not, but someone who has read the Mahabharat might know:

A Rishi by name Charuvaka gave the same advice when Pandavas were around, which modern economists are giving today. He told the people to spend and be happy, if need be by borrowing. No need to repay, if you cannot, he counseled. No sin would attach, he assured.

Fortunately his advice was rejected by us thousands of years back. That is why perhaps we are still alive as a nation. INDIA (BHARAT). All our old companions and ancient civilizations are in the archives today. Now we have the very same advice. That is saving as sin, and spending as virtue. This is central to neo-economics.

ACTION PLAN:
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Before you follow these neo-Charuvakas, get some fools to save so that you can borrow from them and spend, after you exhaust your savings.

After all, this is precisely what the US has successfully done in last two decades !!!

singhkapoor
March 5th, 2003, 06:49 AM
Dear Yajuvendra ji

Although the statement (on the face of it) seems contrary to common perception. IT IS AN EYE OPENER....ESP FOR A PERSON LIKE ME WHO IS MENTALLY CHALLENGED IN FINANCIAL MATTERS.

THANX

uday
March 5th, 2003, 10:29 AM
nice article..

narender
March 27th, 2003, 04:07 PM
Yajuvender Singh ji....its is very nice topic.I really liked it. Nowdays indian government is taking action in this respect by lowering intrest rates.lets see how this will affect the mentality of the people. Although saving to a limit is must for financial confidence and stability but more than a limit it becomes stagnating assets . So its much better if we take some risk and invest that money in some other sort of income.

ahlawat
March 28th, 2003, 02:59 AM
ND article

devdahiya
February 19th, 2005, 01:59 PM
Every two years or so some developed country will come out with a unique disease[unheard of by anyone] with alarm bells attached to it.Being a dominant country,they are always successful in generating a kind of interest and concerns in the minds of general public and that various govts in the world are made to act fast to fight the disease and here lies the catch. As they would have already tested equipments,medicines,infrastructure and literature before announcing the SO CALLED DISEASE,they are in a position to sell advice,infrastructure,medicine,equipment and everything related to the so called disease and is able to sell it to all the nations at a self dictated
price,and make a fast buck. Thats why some one has rightly said," MONEY IS NOT HIS,WHO HAS IT BUT OF HIS,WHO USES IT."

rkumar
February 19th, 2005, 05:02 PM
I read this articlear earlier also some where and ever since have been thinking about the mechanisms of economics. Often I get amazed when IMF or World Bank advises countries like India regarding its budget deficits and does not say a word to countries like USA.

Ofcourse for any economic activity one needs a producer and a consumer. USA has certainly been the world's largest consumer so far. I am not sure if that was by design or by default. It might be of interest here to find out as to when USA turned turned out to be more of a consumer than producer? Let us not forget that USA is still a very large producer of high tech goods and its the US multinationals who control most of high tech production world wide. However, things are changing very fast and I am not sure if it will be able to maintain that place with same difference for too long. Many consumer centres are emerging on the scene. Therories of economics do often change with time. We all know that at the end of the day there is no free lunch and some one has to pay for it...Let us see who pays for USA or who sends the bill to USA in the end..

RK^2

anujkumar
February 22nd, 2005, 01:52 PM
There are free lunches!

"Economy" is man made abstract mechanism. Those who are on the forefront always set the rule, these rule has no "Axiomatic" justification. In the end, when it would be time to pay the bill, "they" will change the rules.

e.g. Everything above the purchasing power parity in the foriegn exchange rate.. is not justifiable in some absolute terms.

Because these "economic powers" have disproportionate bargaining power (monopoly.. should I say) Most new inventions are highly over priced and all "dirty/hard" work become cheaper. Globalization is the exact mechanism that make is possible. Outsourcing: people who do 90% of the work share 10% of the revenue generated.

If someone (God) was to design a economy for mother earth, it would be completely different. There won't be such disparity between rich and poor countries, after all it's not hard to learn to "consume" if that's what it takes. In that sense the current economic system of THE world is not at all "socially efficient".

US is consuming most of world fossil fuel, owned by some other countries. Who think, that when it would be gone. USA is gonna go downhill. no way!