How Big Economies Work?

Educate yourselves........This is very interesting Economics I read in an article and think u all should read it as well.

Consider NEO-ECONOMICS: SAVINGS AS SIN, SPENDING AS VIRTUE


Japanese save a lot.
They do not spend much.
Also Japan exports far, more than its imports.
Has an annual trade surplus of over $100 billions, which is Rs.5 lakh crores.
Yet,
Japanese economy is considered weak, even collapsing.


Americans spend, save little.
Also US import more than it exports.
Has an annual trade deficit of over $400 billions, which is over Rs.20 lakh crores.
Yet,
The American economy is considered strong and trusted to get stronger.
Indeed a contrast.


But where from do Americans get money to spend?
They borrow from Japan, China, and even India.
Virtually others save for US to spend.
Global savings are mostly invested in US, in dollars.
India itself keeps its foreign currency assets of over $50 billions in US securities.
China has sunk over $360 billion in US securities.
Japans stakes in US securities is in trillions.


Result...
The US has taken over $5 trillion from the world.
Want to know it in rupee?? Rs.2,50,000 crore crores!
So, as the world saves for US,.
Americans spend freely.
Today, to keep the US consumption going, which is for the US economy to work, other countries have to remit $180 billion every quarter, that is $2 billion a day, to the US! Otherwise the US economy would go for a six.
So will the global economy.
The result will be no different if US consumers begin consuming
less.


A Chinese economist asked a neat question.
Who has invested more, US in China, or China in US?
The US has invested in China less than half of what China has invested in US- The same is the case with us.
We have invested in US over $50 billion.
But the US has invested less than $20 billion in
India.


Why the world is after US?
The secret lies in the American spend, in that they hardly save.
In fact they use their credit cards to spend their future incoihe.
That the US spends is what makes it attractive to export to the US.
So, US imports more than what it exports year after year.


The result.
The world is dependent on US consumption for its growth.
By its deepening culture of consumption, the US has habituated the world to feed on US consumption.
But as the US needs money to finance its consumption, the world provides the money.


It’s like a shopkeeper providing the money to a customer so that the
customer keeps buying from the shop.
The customer will not buy, the shop won’t have business, unless the shopkeeper funds him.
The US is like the lucky customer.
And the world is like the helpless shopkeeper financier.
Who is America’s biggest shopkeeper financier?
Japan.!!!!!!!!


Yet it is Japan which is regarded as weak.
Modern economists complain that Japanese do not spend, so they do not grow.
To force the Japanese to spend, the Japanese government exerted itself. Reduced the savings rates, even charged the savers.
Even then the Japanese did not spend.
Their traditional postal savings alone is over $1.2 billions, that is. Rs.60 lakh crores, about three times the GDP of India.
Thus, savings, far from being the strength of Japan, has become its pain.


What is the lesson?
That is, a nation cannot grow unless the people spend, not save.
Not just spend, but borrow and spend. Dr.Jagdish Bhagwati, the famous Jndain-born economist in the US, told Dr.Manmohan Singh that Indians
wastefully save.
Ask them to spend, he said.
On imported cars and, seriously, even on cosmetics! This, he counseled, will put India on a growth curve. But -like Japanese we too are not obliging.


Modernists may not, but one who has read the Mahabharatha will, know. A Rishi by name Charuvaka gave the same advice when Pandavas were around, happy, if need be by borrowing.
No need to repay, if you cannot, he counseled.
No sin would attach, he assured.


Fortunately his advice was rejected by us thousands of years back. That is why perhaps we are alive as a nation.
Our old companions are in archives today.
Now we have the very same advice.
That is saving as sin, and spending as virtue.
This is central to neo-economics.


Caution!!!!
Before you follow these neo-Charuvakas, get some fools to save so that you can borrow from them and spend, after you exhaust your savings.
This is what US has successfully done in last two decades.



Regards

Sudan


Source: unknown