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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (13982)	5/24/2009 11:23:56 AM
From: elmatador	Read Replies (1) \| Respond to of 24758

He is not talking about the real economy he is talking about 'accountancy entities' that he proceeds to make 'what if' scenarios, playing with those accountacy entities, from a normal country's perspective. If it is the US, which has the reserve currency, it perhaps more complicated. Defining accounting entities: budget deficit is government spend more than it takes in in taxes. trade deficit means the nation imports more than it exports. "Any saving the nation does" means the citizens that composed the nation spend less money than they earn, thus generating savings. When he mentions "government savings", he means the government starts to spend less than the amount of taxes pouring in, thus having a superavit instead of a deficit. "Trade surplus" means the country exports more than it imports. Then he starts drawing conclusions based on the interplay of 'accountancy entities': savings of those individual citizens "finances either private domestic investment directly or the accumulation of claims on foreigners." "National saving is the only way a country can have its capital and own it too." Say you are Norway. You do not spend all your oil income and create a Sovereign Wealth Fund. This is an example of having its capital and owning it too. Now suppose a country is not Norway. It has no safety net for the citizens and its citizens save a lot. Since it has no convertible currency, it needs to buy USD to create a foreign reserve that it uses to back its currency up. Or the government have state-owned banks as tool of national development that issues debentures to finance enterprises.