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robertogreco : savings   13

Is this what's really hurting the US middle class? | World Economic Forum
"The saving critique merits further analysis. The data show that countries with saving deficits tend to run trade deficits, while those with saving surpluses tend to run trade surpluses. The United States is the most obvious example, with a net national saving rate of 2.6% in late 2015 – less than half the 6.3% average in the final three decades of the twentieth century – and trade deficits with 101 countries.

The pattern also holds true elsewhere. The United Kingdom, Canada, Finland, France, Greece, and Portugal – all of which have large trade deficits – save much less than other developed countries. Conversely, high savers like Germany, Japan, the Netherlands, Norway, Denmark, South Korea, Sweden, and Switzerland all run trade surpluses.

Saving imbalances can also lead to destabilizing international capital flows, asset bubbles, and financial crises. That was the case in the run-up to the financial crisis of 2008-2009, when global saving imbalances, as measured by the disparities between countries with current-account deficits and surpluses, hit a modern record. The asset and credit bubbles fueled by those imbalances brought the world to the brink of an abyss not seen since the 1930s.

Here, too, there is considerable finger pointing. Deficit countries tend to blame the yield-seeking “saving glut” that sloshes around in world financial markets. As former US Federal Reserve Chairman Ben Bernanke put it, if only countries like China had spent more, the bubbles that nearly broke America would not have formed in the first place. Others have been quick to point out that America’s supposed growth miracle probably could not have happened without the capital provided by surplus countries.

The prudent approach would be to strike a better balance between saving and spending. That is particularly important for the US and China, which together account for a disproportionate share of the world’s saving disparities. Simply put, America needs to save more and consume less, while China needs to save less and consume more. To succeed, both countries will have to overcome entrenched mindsets.

On this front, China has been leading the way, with a strategy of consumer-led rebalancing that it introduced five years ago. The results so far have been mixed, as inadequate funding of a social safety net continues to temper the support to household incomes provided by services-driven job creation and urbanization-led increases in real wages. But China has lately shown a commitment to addressing this shortcoming. Its recently enacted 13th Five-Year Plan aims to dampen fear-driven precautionary saving through interest-rate liberalization, the introduction of deposit insurance, the loosening of the hukou residential permit system (which would improve benefit portability), and relaxation of the one-child family planning policy.

The US, however, is headed in the opposite direction. There is no interest in debating the saving issue, let alone implementing policies to address it. A pro-saving US policy agenda should draw on the following: longer-term fiscal consolidation, expanded IRAs (individual retirement accounts) and 401Ks, consumption-based tax reform (such as value-added or sales taxes), and interest-rate normalization. Instead, US politicians continue to focus on keeping the consumption binge going, regardless of its implications for America’s saving imperative.

The asymmetrical response of the world’s two largest economies to their respective saving dilemmas has far-reaching consequences. To the extent that China makes progress on the road to consumer-led rebalancing, it will shift from surplus saving to saving absorption. Already, China’s gross national saving rate has declined from a peak of 52% of GDP in 2008 to around 44% this year. It should fall further in the years ahead.

The US, long locked in a codependent economic relationship with China, cannot afford to ignore this shift. After all, along with reduced current-account and trade surpluses, China’s consumer-led shift to saving absorption likely entails diminished accumulation of foreign-exchange reserves and reduced recycling of those reserves into dollar-based assets such as US Treasuries.

To the extent that America fails to boost its domestic saving, the lack of Chinese capital may well force the US to pay a steeper price for external financing, through a weaker dollar, higher real interest rates, or both. Such are the classic pitfalls of codependency: when one partner alters the relationship, there are consequences for the other.

No country can prosper indefinitely without saving. Holding the world’s reserve currency, America has gotten away with it, largely because the rest of the world let it. After all, the enablers – especially export-led economies like China, along with its resource-dependent supply chain – benefited from America’s consumption binge, as it drove an outsize expansion of global trade.

But those days are numbered. American voters – especially disenfranchised, angry middle-class workers – increasingly recognize that something does not add up. Yet US politicians continue to deflect the electorate’s anger outward, dismissing the growth subsidy that accompanies the “kindness of strangers.” It is time for politicians to own up to the uncomfortable truth: The saving deficit is the single greatest threat to the American Dream."
us  middleclass  society  china  2016  class  savings  economics  inequality  debt  politics  policy 
june 2016 by robertogreco
Why the Wealthiest Americans Are the Real 'Job-Killers' | Economy | AlterNet
"None of this is particularly complex. In 1978, the top 1 percent of the ladder took in just under 9 percent of the nation's income, leaving a bit more than 91 percent for the rest of us. In 2007, the year before the crash, they took in 23.5 percent, leaving just 76.5 percent for the rest of the population to split up.<br />
They banked most of that income, whereas we would have spent it. The fact that we're broke means that businesses are facing less demand for their goods and services than they otherwise would, and have less need to hire a bunch of employees. And that dynamic explains why it's the wealthiest Americans who are the real “job killers.”"
greed  wealth  economics  jobs  savings  us  taxes  2011  jobcreation  unemployment  consumption  wealthdistribution 
july 2011 by robertogreco
Why the Wealthiest Americans Are the Real 'Job-Killers' | Economy | AlterNet
"None of this is particularly complex. In 1978, the top 1 percent of the ladder took in just under 9 percent of the nation's income, leaving a bit more than 91 percent for the rest of us. In 2007, the year before the crash, they took in 23.5 percent, leaving just 76.5 percent for the rest of the population to split up.
They banked most of that income, whereas we would have spent it. The fact that we're broke means that businesses are facing less demand for their goods and services than they otherwise would, and have less need to hire a bunch of employees. And that dynamic explains why it's the wealthiest Americans who are the real “job killers.”"
greed  wealth  economics  jobs  wealthdistribution  savings  us  taxes  2011  jobcreation  unemployment  consumption 
july 2011 by robertogreco
Is Italy Too Italian?: From Taxis to Textiles, Italy Chooses Tradition Over Growth - NYTimes.com ["Roughly one-quarter of Italy’s G.D.P. is off the books."]
"Economists...see a country w/ a service sector dominated by guilds..., a timid entrepreneur class...a political system in thrall of older voters who want to keep what they have, even if it dooms the nation to years of stasis.

They see a society whose best & brightest are leaving & not being replaced by immigrants, because Italy has so little upward mobility to offer.

To Professor Giavazzi, the future here doesn’t look like Greece. It looks like Argentina.

“Before World War II, Argentina was rich. Even in 1960, the country was twice as rich as Italy.” Today...you can compare the per capita income of Argentina to that of Romania. “Because it didn’t grow. A country could get rich in 1900 just by producing corn & meat, but that is not true today. But it took them 100 years to realize they were becoming poor. & that is what worries me about Italy. We’re not going to starve next week. We are just going to decline, slowly, slowly, & I’m not sure what will turn that around.”
italy  argentina  guilds  economics  growth  politics  aging  age  policy  immigration  2010  stagnation  markets  china  globalization  local  slow  manufacturing  crisis  deficits  savings  society  decline  blackmarkets  offthebooks  protectionism  jobs  craftsmanship 
august 2010 by robertogreco
Pension funds chasing highest returns on investment force behind recession | Business | The Guardian
"These savers have racked up trillions of dollars over the last 30 years and own much of the wealth created during that period. Their power is vast. They own the homes, the stock markets and they lent their cash to the banks, governments and companies and as we know to our cost, there were plenty of them.
rcession  greed  2010  greatrecession  investments  pensions  risk  europe  us  uk  california  retirement  savings  alangreenspan 
april 2010 by robertogreco
Prudent Chile Thrives Amid Downturn - WSJ.com
During the emerging economies' commodities boom a few years back, Chilean Finance Minister Andrés Velasco was a wet blanket at the fiesta. Chile, the world's largest copper producer, was reaping a bonanza from the quadrupling in the metal's price. Mr. Velasco insisted on squirreling away a large chunk in a rainy-day fund. As the savings swelled above $20 billion - more than 15% of Chile's economic output -- Mr. Velasco faced growing pressure to break open the piggy bank. In September, protesters barged into a presentation by Mr. Velasco, carrying an effigy of him and shouting, "The copper money is for the poor people." The 48-year-old Mr. Velasco, wary that a flood of copper income could generate lending and consumption bubbles, stood his ground, even as the popularity of the center-left government withered. Latin American history, he cautioned, was full of "booms that had been mismanaged and ended badly. Today Mr. Velasco looks like a prophet."
chile  economics  copper  moderation  development  globalization  latinamerica  politics  money  crisis  2009  prudence  savings  rainydayfund  andrésvelasco 
november 2009 by robertogreco
John Gerzema: The post-crisis consumer | Video on TED.com
"John Gerzema says there's an upside to the recent financial crisis -- the opportunity for positive change. Speaking at TEDxKC, he identifies four major cultural shifts driving new consumer behavior and shows how businesses are evolving to connect with thoughtful spending."
trends  johngerzema  community  volunteerism  crisis  ideas  consumer  ted  consumerism  values  savings  conspicuousconsumption  quality  transparency  business  travel  mobility  liquidity  value  libraries  cable  sharing  lending  learning  education  continuingeducation  diy  urbanfarming  sustainability  infrastructure  environment  creditcards  cooperation  trust  crowdsourcing  artisinal  glvo  localcurrency  green  consumption  kogi  carrotmobs  incentives  twitter  ethics  fairplay  empathy  respect 
october 2009 by robertogreco
BrightScope | 401k Plan Ratings
"BrightScope quantitatively rates 401k plans and gives plan sponsors, advisors, and participants tools to make their plans better.
401k  investment  evaluation  ratings  analytics  comparison  finance  statistics  money  savings  personalfinance 
september 2009 by robertogreco
trendwatching.com's December 2008 Trend Briefing, covering half a dozen consumer trends for 2009
Nichetributs, Luxyoury, Feedback 3.0, Econcierge, Mapmania (see quote), and Happy Endings. "As the Googles, Nokias (who expect half of their handsets to be GPS enabled by 2010-2012), MapQuests, Navteqs, Openstreetmap.orgs, Apples and TomToms of this world continue to build the necessary infrastructure, devices and apps, any consumer-focused brand would be stupid not to be partnering or experimenting with map-based services. Why? Geography is about everything that is (literally) close to consumers, and it's a universally familiar method of organizing, finding and tracking relevant information on objects, events and people. And now that superior geographical information is accessible on-the-go, from in-car navigation to iPhones, the sky is the limit."
technology  branding  trendwatching  geoweb  maps  mapping  location  geography  trends  2009  mobile  marketing  participation  feedback  forums  luxury  consumers  consumption  recession  savings  green  ecology  simplicity  frugality  identity  transparency  reviews 
december 2008 by robertogreco
Marginal Revolution: Why this recession might last a while [points to: http://www.nytimes.com/2008/08/24/business/yourmoney/24view.html?partner=rssuserland&emc=rss&pagewanted=all]
This is what bothers me about many economists – they want to be considered experts, but they never really commit to anything. And then they completely change their tune and conveniently forget their previous predictions and assessments. Where were they (not including a few like Thornberg) when home prices were increasing over 20% a year and people were using these fictitious price gains as income? Tyler Cowen is more of an entertainer than anything else. And he is a great entertainer, but don't count on his opinions to be accurate more than half of the time. With that said, I do believe this recession will last a while and I think his metaphor here about untangling wires is a good one. I would just add that you should be even more careful about who you ask to undo the tangle and definitely avoid choosing those that allowed the wires to be tangled in the first place.
tylercowen  economics  recession  savings 
august 2008 by robertogreco
Marginal Revolution: Spend More Today
"Interesting discussion about savings...I say take the years of your retirement one at a time over the course of your life rather than in a lump at the impossible-to-guarantee end"
economics  life  people  savings  retirement  marginalrevolution 
july 2008 by robertogreco

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