[mattduke]

The only thing difficult about printing money is coming up with the fresh lies all the time. Man, this is rich.

nytimes

[Hermes]

Needs "login" to see the article... can you post the relevant parts plz?

[cube]

Needs "login" to see the article... can you post the relevant parts plz?

There's no need to read the article I think the title says enough.

I do not doubt that spending has dropped and people are saving more, but when the hell did saving money become a bad thing?
oops I forgot that is exactly what Mainstream media is trying to portray!
It is very clear.
The power elites want us to be in a deep hole so they can collect interest on our debts.

[TWilliam]

Needs "login" to see the article... can you post the relevant parts plz?

The actual title of the article is Chinese Savings Helped Inflate American Bubble. Here's the first few paragraphs:

WASHINGTON — In March 2005, a low-key Princeton economist who had become a Federal Reserve governor coined a novel theory to explain the growing tendency of Americans to borrow from foreigners, particularly the Chinese, to finance their heavy spending.

The problem, he said, was not that Americans spend too much, but that foreigners save too much. The Chinese have piled up so much excess savings that they lend money to the United States at low rates, underwriting American consumption.

This colossal credit cycle could not last forever, he said. But in a global economy, the transfer of Chinese money to America was a market phenomenon that would take years, even a decade, to work itself out. For now, he said, “we probably have little choice except to be patient.”

Today, the dependence of the United States on Chinese money looks less benign. And the economist who proposed the theory, Ben S. Bernanke, is dealing with the consequences, having been promoted to chairman of the Fed in 2006, as these cross-border money flows were reaching stratospheric levels.

In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States.

China, some economists say, lulled American consumers, and their leaders, into complacency about their spendthrift ways.

Incidentally, a handy little Firefox extension that gets around a lot of these 'register-before-reading' gateways is BugMeNot...

[niknak]

Burn a credit card and
Starve a luminati



great bumper sticker.

[copious.abundance]

This is not a lie, I have been reading about this for at least 3-4 years.

[copious.abundance]

Here ya go - from 2005:

--> Business Week <--

JULY 11, 2005
Too Much Money
A global savings glut is good for growth -- but risks are mounting

[...]

But that's not what is happening. Long-term interest rates are falling and have now dipped below 4%. The total of residential and business investment has been rising and now stands at 16.5% of gross domestic product, well above the average for the 1990s. And there are few signs that the economy is stalling.

These surprising events are forcing economists, investors, and policymakers to think more globally than ever before. In just the past few months, they've begun to consider seriously two intertwined and heretical notions: What really matters for interest rates is the global economy, and there the problem may be too much savings, rather than too little.

Look around the world, and extra money is piling up in all sorts of places. Japanese corporations are recording record profits, but not doing much spending. Chinese companies are on an investment tear, but the country is getting so much money from exports that it has billions to spare, including $18.5 billion that China National Offshore Oil Corp. (CNOOC) bid for Unocal. The surge in oil prices -- now about $60 a barrel -- is giving oil-producing countries such as Russia and Saudi Arabia far more money than they can use right away. And the aging workers of Europe are building nest eggs for an uncertain future.

The International Monetary Fund predicts that in 2005 the worldwide savings rate should hit its highest level in at least two decades. Surprisingly, even in the profligate U.S., businesses have been accumulating huge sums as undistributed corporate profits -- running at a record annual rate of $542 billion in the first quarter -- have almost doubled in the past two years. This corporate hoarding explains why the U.S. national savings rate, which includes governments and businesses as well as households, rose to 14.7% of national income in the first quarter, up from 12.8% two years ago.

[...]

[smallpoxgirl]

I do not doubt that spending has dropped and people are saving more, but when the hell did saving money become a bad thing?

In order to understand it, you have to think like an economist. In general, economists will say that excessive savings is a central causative factor in depressions. Fear leads to decreased spending and increased savings. That leads to economic contraction and unemployment. As more people are unemployed, the scramble to save money intensifies. Because people have stopped spending money, deflation sets in. That makes matters even worse for people with debts, because incomes are falling and the value of the assets they bought with the loans are falling, but the loans are continuing to grow with interest. Eventually people have enough saved that they start to feel safe and start buying again. That leads to more jobs, reverses deflation, etc.

If you read Keynesian economic theory, for example, they'll say that at the outset of a depression, the government should spend money like crazy to offset the negative impact of increased savings. OTOH, Keynesians say that during boom cycles the government should do things like raise interest rates and increase taxes to try and cool down the economy, and encourage more savings and less spending. That way people are in a more stable situation and are less vulnerable to fear and depressions.

[mattduke]

Keynes was an idiot. Check out this gem from his "General Theory":

"If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of repercussions, the real income of the community, and its capital wealth, would probably become a good deal greater than it actually is."

Or if you need a laugh, try reading his "paradox of thrift" one evening. Yes, Keynes economic doctrine which is taught in most major universities is bunk. Politicians love Keynes though because his prescriptions always require large increases in government power.

[Falconoffury]

Any talk about a "savings glut" is just the rich complaining about the poor giving them less money.

Deflation is good because it cleanses the economy of waste, prevents bubbles, and makes money more productive.