Biggest consumer borrowing decline in 65 years

[c1ue]

Re: Biggest consumer borrowing decline in 65 years

But if the money I save is lent to someone else to purchase production plant, then net saving across both of us is zero (he borrowed what I saved).

I don't mean individual savings. I mean net national savings. What you describe is a microcosm of what the US and Asia have been doing.

Maybe it's just a question of what we include in "the world". If all households save, and this money is lent to businesses who spend the money on plant, then in my accounting the net saving is zero (the households lent, the businesses borrowed). But perhaps in your accounting this would count as productive net saving? If so, fair enough.

It would be great if US household income increased and households were prudent enough to save the extra income. But in fact I think what we are seeing is a decline in US household spending, with some of the extra being "saved". This decline will be matched by a decline in production elsewhere, leading to a decline in saving elsewhere that closes the circle with a decline in lending to US households. Overall a bad outcome for everyone.

You are falling into the Chicago School of Economics thought trap.

The assumptions underlying are

1) consumption drives production. This can be true, but does not necessarily have to be true. See the US economy in WW II - much production, decreasing consumption.

2) production drives lending. Again, this can be true, but it does not have to be true. The Industrial Revolution was not propelled by debt - it was propelled by productivity increases being fed back into production. The trap here is assuming production of one thing cannot be reoriented to something else. Yes, a specific machine that makes glass bobs can't be easily converted to growing corn, but there are things which a glass bob making machine can be diverted to making which can assist the growing of corn.

3) saving is matched by lending. See Chris Coles. His argument has been that fractional lending as opposed to 'industrial' lending is one of the reasons why things have gotten out of control. That is - instead of $1 of savings going to $1 of long term investment, instead $1 of savings becomes $30 of bank loan becomes $30 of stock buyback.

4) Free trade is good. This arises from: Trade is good, therefore free trade should be better right? Wrong.

First of all, free trade is a theoretical construct. China doesn't trade any more freely than Japan does. Yet somehow China's internal tax rebates on exported items is fine, and Japan's "Thai rice is bad for Japanese stomachs" is fine, but some nation trying to germinate some of its own industry is not.

Secondly free trade also assumes some parity of trade. This also is complete crap. There are mines for minerals which are available primarily from only a few places in Africa. Are these Africans building the world's highest skyscrapers and making artificial oceans? No. Somehow 'free trade' has served to keep the income from these mineral resources to very low levels such that the host nation is still in a 3rd world position.

The point which Dr. Michael Hudson documented in 'Super Imperialism' was that the 'free trade' policies the US has been pushing (along with its academic stool pigeons, the Chicago School of Economics) benefited the US disproportionately as the then largest producers of surplus industrial equipment and agricultural products. This was even specifically planned for by various American trade organizations.

Thus 'free trade' is merely maskirovka.

[unlucky]

Re: Biggest consumer borrowing decline in 65 years

I don't mean individual savings. I mean net national savings. What you describe is a microcosm of what the US and Asia have been doing.



You are falling into the Chicago School of Economics thought trap.

The assumptions underlying are

1) consumption drives production. This can be true, but does not necessarily have to be true. See the US economy in WW II - much production, decreasing consumption.

2) production drives lending. Again, this can be true, but it does not have to be true. The Industrial Revolution was not propelled by debt - it was propelled by productivity increases being fed back into production. The trap here is assuming production of one thing cannot be reoriented to something else. Yes, a specific machine that makes glass bobs can't be easily converted to growing corn, but there are things which a glass bob making machine can be diverted to making which can assist the growing of corn.

3) saving is matched by lending. See Chris Coles. His argument has been that fractional lending as opposed to 'industrial' lending is one of the reasons why things have gotten out of control. That is - instead of $1 of savings going to $1 of long term investment, instead $1 of savings becomes $30 of bank loan becomes $30 of stock buyback.

4) Free trade is good. This arises from: Trade is good, therefore free trade should be better right? Wrong.

First of all, free trade is a theoretical construct. China doesn't trade any more freely than Japan does. Yet somehow China's internal tax rebates on exported items is fine, and Japan's "Thai rice is bad for Japanese stomachs" is fine, but some nation trying to germinate some of its own industry is not.

Secondly free trade also assumes some parity of trade. This also is complete crap. There are mines for minerals which are available primarily from only a few places in Africa. Are these Africans building the world's highest skyscrapers and making artificial oceans? No. Somehow 'free trade' has served to keep the income from these mineral resources to very low levels such that the host nation is still in a 3rd world position.

The point which Dr. Michael Hudson documented in 'Super Imperialism' was that the 'free trade' policies the US has been pushing (along with its academic stool pigeons, the Chicago School of Economics) benefited the US disproportionately as the then largest producers of surplus industrial equipment and agricultural products. This was even specifically planned for by various American trade organizations.

Thus 'free trade' is merely maskirovka.

Man, it's tough to argue with folks who are so resistant to conventional thinking

But I guess exposure to the unconventional is what draws me to this site. And in times like this, who can argue that conventional thinking is not flawed

Thanks for your comments, thought processes successfully disrupted!