from Mehrotra Ravi ,( RPM pgp8 fame , his email is rpmehrotra@hotmail.com )
I am forwarding an interesting story about world economy. How far it is true I don't know.
Amazing logic indeed...
This is a crazy world!
Interesting article written by an Indian Economist
Can you tell me the name ?
Japanese save a lot. They do not spend much. Also, Japan exports far more than it imports.
Americans spend, save little. Also US imports more than it exports.
Has an annual trade deficit of over $400 billion. Yet, the American economy is considered strong and trusted to get stronger.
But where from do Americans get money to spend? They borrow from Japan, China and even India.****No , USA does not ask or force Japan , China ,etc. to lend money to USA ! Find me the document that says so ! ( It is a (an unintelligent ) decision by ill informed economists in these countries ,- some taught by respected Dr. Sau ) **2
Virtually others save for the US to spend. **** American consumers BORROW money against over valued houses or against their future earnings via credit cards. Global savings ***** Dollar based treasury notes mostly may not be construed as savings of the country or of the people of the country like India , Japan ...**3 are mostly invested in US, in dollars.
India itself keeps its foreign currency assets of over $50 billion in US securities. China has sunk over $160 billion ***** 2 to 4 trillion $ in US securities.
Japan's stakes in US securities is in trillions.***
Result:
The US has taken over $5 trillion from the world. So, as the world
saves ****** please be careful about usage of the term saving , in fiat currency regimes , a country s savings are UNLIKE the savings of a household !! This is very important to grasp and understand ... **4. for the US - It's The Americans who spend freely **** No , they do not ......**5.... Today, to keep the US consumption going, that is for the US economy to work, other
countries have to remit $180 billion every quarter, which is $2
billion a day, to the US! ****** so called other countries remit to USA only due to uneducated economists ! ... tell me why should India remit to USA . Why ? Why ? Why ? Why do we not keep these Dollar balances in State Bank of India in a Dollar account ? Tens of thousands of Indian Economists prefer to eat halva , instead of explaining the pros and cons of this issue .**6
A Chinese economist Name him ..*7 . 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 India. We have invested in US over $50 **8 ? maybe 350 billion in 2015
billion. But the US has invested less than $20 billion in India.
Why the world is after US?
The secret lies in the American spending, 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:
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 shop. If the customer will not buy, the shop won't have business, unless the shopkeeper funds him. The US is like the lucky customer. And the world is like the helpless shopkeeper **9 the issues are more complex , answer me suppose usa decides to replace its domestic dollars at par with a new dollar , and replace the overseas dollar liabilities with one new dollar for ten old dollars , then can China or India stop the USA ? .
financier.
Who is America's biggest shopkeeper financier? Japan of course. Yet it's 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 (habits don't change, even with taxes, do they?). Their traditional postal savings alone is over $1.2 trillion.Thus, savings, far from being the strength of Japan, has become its pain.** 10 , do you know that Japan is a vassal country that has not yet been given independence after Japan s defeat in 1945 ? Please answer this first and then let us talk about the logic in Japan s economic decisions .
Hence, what is the lesson?
That is, a nation cannot grow unless the people spend, not save. Not just spend, but borrow and spend.
Dr. Jagdish Bhagwati, the famous ** just because he gets salary in ?Columbia Univ. what else ? Indian-born economist in the US, told Manmohan Singh that Indians wastefully save. Ask them to spend, on imported cars and, seriously, even on cosmetics! This will put India
on a growth curve. This is one of the reason for MNC's coming down to India, seeing the consumer spending.
'Saving is sin, and spending is virtue.'
But before you follow this Neo Economics, get some fools to save so that you can borrow from them and spend !!!
It is very simple to be happy, but very difficult to be simple.
******* better to discuss over skype !!
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[7/11/2015, 10:31 AM] I.
Pandyan K.
Mumbai:
Interesting old story. It is not just the governments that keep their reserves in U.S. against pieces of paper that they proudly store.
Every human being on this planet (especially ones who have traveled to US) keep some printed pieces of paper (called $). Just like jewelry.
It is clearly: I will buy your goods and pay as long as you keep your profits in my bank. Cost of mfg is an expense (income for the producer) that is received and spent. Profit is added to the asset. This goes on.
It explains why US can afford to spend (lesser) in making investments in these countries.
When the going gets tough US has to only print currency. It re-adjusts the relative share of what people own! (Think about it)
So it NOT economics at play. It is the ultimate religion. Blind faith ***11 due ignorance of the weaknesses and strenghts of the USA system !! on some notion called the U.S. Just imagine what will happen to the world (and of course, the U.S.) if and when the world stops praying to the $.
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[7/11/2015, 11:06 AM]
M Jayaram M,
bangalore:
One moe point to add - the other nations are forced to save in dollars as that is the accepted reserve currency next to gold which is illiquid. Not only has Japan and rest got to investin dollars but also ensure that dollar value is kept at a high rate lest their savings disappear ** what is savings in fiat currency regime , since 1972 ?
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[7/11/2015, 11:11 AM] I.
Pandyan K.
Mumbai:
That s precisely my point: one way if looking at it that most countries are forced into this situation, because Japan and Europe (primarily post WWII) started and kept it fed.
Supposing the other biggie now China manages enforce RMB as an alternative - it could lead to a differently complex world. That can happen NOT due to economics but because of changing faith and belief. That to me is a new religion! 😊*** 12 I completely agree with this !!!!!!
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