Re: stimulate savings?

Posted by Russ Abbott on Feb 09, 2009; 7:50pm
URL: http://friam.383.s1.nabble.com/stimulate-savings-tp2298933p2299042.html

I think you're right that we have to find a new way for the economy to work. We don't know what that way is. It certainly needs more savings and less fizz.  Whatever it is (or will be) is the to-be state, which we really don't yet understand.

Until we get there, we live in the as-is state, which currently is very unstable -- and getting worse. . For many people that's quite a problem. 

So the question is how to survive the as-is state until we can understand a desired to-be state.  (Most likely the to-be state will emerge and won't actually be "figured out.")  Whether you favor Keynesian economics or not, we can't ignore the traversal from here to there. How will it really happen? What will happen to people along the way? Those questions can't be ignored.

-- Russ Abbott
_____________________________________________
Professor, Computer Science
California State University, Los Angeles
o Check out my blog at http://russabbott.blogspot.com/

On Mon, Feb 9, 2009 at 11:45 AM, Stephen Thompson <[hidden email]> wrote:

Sorry, but 60-70%+ of our economy is spending.  If individual citizens won't
spend (within reason and have a reasonable savings rate too) then the economy
will have trouble.  There are lots of factors involved - bad debts and banks won't lend,
etc.  

However, there does need to be spending in the economy.  So the Gov't needs to step
up and spend.  Classic Keynesian economics.

Savings are good too, but savings alone will not move the economy along. 

Stephen Thompson
Mpls, MN




Mike Oliker wrote:

Are we fighting the last Depression with this stimulus bill, when our situation is quite different?  In 1929 we had a huge bubble of factory building, leaving us with tremendous idle capacity.  People were saving a great deal and investing it in stocks which collapsed.

 

Today we have borrowed massively against assets which has dropped a lot in value.  Our economy has been consistently stimulated within an inch of its life.  Perhaps more stimulus is not the answer.

 

Perhaps what we need is a massive savings plan.  Cut withholding taxes for a few years – it is broad based with a bias towards the low end of the scale, it helps businesses which hire or keep their employees, and people will save it – which is a good thing.  They will pay down their mortgages and their credit cards and cash will flow into banks as equity, helping to repair everyone's balance sheets.

 

From a base of fiscal soundness we are better able to make the transition to an economy featuring more savings and exporting and infrastructure greening/modernizing and less consumption.  The economy we had, based on borrowing against our houses to consume a lot, is not coming back; at least not anytime soon.  We need to move towards a new economy which is waiting to be born.

 

-Mike Oliker

Albuquerque, NM

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FRIAM Applied Complexity Group listserv
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Meets Fridays 9a-11:30 at cafe at St. John's College
lectures, archives, unsubscribe, maps at http://www.friam.org