more than it imports. Has an annual trade surplus of over 100
Interesting article written by an Indian Economist
Japanese save a lot. They do not spend much. Also, Japan exports far
billions. Yet Japanese economy is considered weak, even collapsing.
Has an annual trade deficit of over $400 billion. Yet, the American
Americans spend, save little. Also US imports more than it exports.
US securities. China has sunk over $160 billion in US securities.
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.
Virtually others save for the US to spend. Global savings are mostly
invested in US, in dollars.
India itself keeps its foreign currency assets of over $50 billions in
Japan's stakes in US securities is in trillions.
The US has taken over $5 trillion from the world. So, as the world
saves for the US - Its The Americans who 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, which is $2
billion a day, to the US!
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 India. We have invested in US over $50
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 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
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 trillions, about three times the
Indian GDP. Thus, savings, far from being the
strength of Japan, has become its pain.
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 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.
Have a nice day !!