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To: Sarmad Y. Hermiz who wrote (123192)	4/7/2001 4:59:23 PM
From: GST	Read Replies (1) \| Respond to of 164684

Sarmad: I value Mark's contributions - I think he is wasting his time talking to the bubbleheads.

To: Sarmad Y. Hermiz who wrote (123192)	4/7/2001 5:42:57 PM
From: GST	Read Replies (2) \| Respond to of 164684

Sarmad "If it is this case, then how is that superior to the Fed printing some dollars, and depositing them in that bank, and the bank loans them to a business which adds output to the economy?" That is, in a sense, what happens now. The question is, how much money to "print". Print too much and you have "inflation" -- in other words the purchasing power of the currency declines because the production of goods and services is not growing as fast as the supply of money in circulation. Fortunately we have an answer -- just keep on printing dollars and give the dollars to foreigners who will just give us stuff they make in return for our IOU's. In this way we can consume as much as we want, save nothing and not worry about huge and growing imbalances between what we consume and what we produce. Now let me answer your primary question -- what has the savings rate got to do with the economy? First ask yourself these questions: 1. Can you, Sarmad, consume more than the value of what you produce? Yes you can. It is called borrowing money. We almost all do this. But how many years in a row could you finance your excess consumption in this way? 1 year? 10 years? 50 years? Forever? 2. Can a country do the same thing? Yes, it is called a current account deficit and it is the means to pay for more goods than we produce which is called a trade deficit. 3. Does it matter if we, as a country, just keep on consuming more than we produce? Well, like you and your family, in the short run it might not matter, but eventually you find yourself pretty deep in debt -- ever have that happen to you? If something happens and you lose your job or have a problem -- you hit the wall and can't make the payments and lose everything you have -- we call that bankruptcy. Even if you do not lose your job and go bankrupt, as your debts get larger you will use more and more of your income to pay the interest. Countries work the same way -- as the debts get bigger we spend more of our income to pay interest on stuff we consumed years before. If we hit the wall and cannot pay the interest we could still print more money and devalue the currency. This is what happened in the "Asian crisis" which was, basically, weak countries getting into debt way over the heads. 4. Does devaluation of the currency matter? It only matters under two conditions: It matters if you buy and sell to people in other countries and wish to continue to do so. North Korea and Albania don't have anything to worry about. It matters if you care about your standard of living -- ask people in Asia a few years back what it is like when their currency goes down the drain. 5. Some people will tell you that the US is so rich, so all powerful, so impervious to anything ever going wrong that none of this is even remotely possible. Consume more than we produce? Hell yes, no problem now, no problem ever. That is the Bill H. approach -- "we are the United States of America". Well we did not get to be "the United States of America" by consuming vastly more than we produce -- I can tell you that. We had a stock market bubble -- we don't need a currency bubble. Now we either learn to save or watch our status deteriorate year by year, like a great athlete past his glory years with a substance abuse problem -- in ten years it won't help us to say "we are the United States of America".

To: Sarmad Y. Hermiz who wrote (123192)	4/9/2001 5:01:20 PM
From: Wayners	Read Replies (2) \| Respond to of 164684

Savings in and of itself won't increase a National Income. It takes savings plus investment to raise GDP or National Income (shift the C+I+G curve).

To: Sarmad Y. Hermiz who wrote (123192)	4/9/2001 5:18:32 PM
From: Skeeter Bug	Respond to of 164684

>>I took dollars and buried them in my back yard, that would be savings right ? So what good will that do for the economy?<< sarmad, let me make one example very simple. 1. if i have $1,000,000 in the bank and i lose my job, how much am i going to reduce my spending? 2. if i'm $20k in debt (ie, never saved!) and i lose my job, how much am i going to reduce my spending? sarmad, #2 will cut spending drastically more than #1. spending stalls, more jobs lost... repeat. a classic negative spiral. those negative savings will have to be made up at some point. when it is, the economy gets even worse causing more folks to save more.