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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Joe Stocks who wrote (20248)	1/3/2005 3:19:33 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Nice board. Thanks for the post and the compliments. Stick around and share more ideas with us. Mish

To: Joe Stocks who wrote (20248)	1/3/2005 3:48:36 PM
From: mishedlo	Respond to of 116555

Plunger, Rien, & Heinz discuss savings Plunger: The problem Japan had was not that the pool of real savings had begun to shrink, but that it was too big for the investment opportunities available once the stock/tech/real estate bubbles all burst. Rien: I believe these are the same. The pool of real savings is NOT expressed in USD or yen. That is what makes it so difficult to use in the numerical sense. If anything, then I suspect that it must be expressed in working hours. Using my approach (wealth redistribution, like yours appearantly) I see no real difference between the two models ("wealth redistribution" and "real savings") except that the "real savings" concept starts from a different viewpoint that makes it easier to visualize the thing. Plunger: Just "more saving needed in the aggregate" is NOT a cure for anything Rien: Correct, but then you are talking about savings as expressed in dollars and cents. But Heinz would probably argue that because we are using dollars and cents that we cannot create "real savings" anymore. I.e. we produce more dollars and cents but fail to produce the "real savings" to represent them. Thus our failure to produce real savings because we have maxed out the financial system) is one way to view the core of the probem. Best, Rien. Heinz: this is essentially correct. money created from thin air is not the same as the pool of real funding. also, in Japan's case, the high personal savings rate has to be put into context: this money has essentially been wasted TWICE already. first during the bubble years, when the private sector debt mountain began to build and malinvestment on a grand scale was perpetrated (remember the Tenno's residence being theoretically 'valued" at all of California's real estate combined in the late 80's?). and then in the post bubble aftermath, when the government went on its huge borrowing spree - essentially commandeering the savings of the nation in order to waste them on favored political constituents (like the building industry) - building the infamous 'bridges to nowhere'. also, note that there is never 'too much' of something. the term 'overinvestment' is not really correct - it's 'malinvestment' - i.e. investment in the WRONG things. this leads to a misalignment of the production structure with actual demand - which in turn creates the economic downswing, or recession. this malinvestment of capital is a result of the boom-bust cycles created by the fiat money system - due to exchanges of something for nothing being made possible, entrepreneurs have no proper yardstick by which to measure the actual level as well as type of demand to be expected in the future (since artificial demand on account of monetary pumping tends to disappear at some point - either when credit is tightened, or when the pool of real funding is exhausted) . as a consequence, they tend to malinvest capital. ================================================================== Mish