Read the following news:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atJq2AOruM1M
Couple of thoughts on the article:
- Larry Summers said now's NOT the time to have "less demand in America...There’s no place that should be reducing its contribution to global demand right now." I'm no economist but it makes me wonder how you can ever get out of a hole by digging yourself deeper. It's illogical to me that as indebted as we are, we can just spend more and more and prosperity will come back. Like a family that already has a pile of debt, how can you get out of debt by getting into more debt? To get out of debt you cut costs and save, and the time to do that is immediately.
- Countries like China that have saved are the ones that can afford to spend, not the US. China's being criticized for not spending enough, esp on its social security programs (75% of its stimulus is on infrastructures). To me they're being very careful with their money. Rather than bailing out failing companies they're spending money on stuff that will help them increase their productivity once the world economy gets better and demand is back, which is smart.
I'm also a little skeptical of government-implemented social security program; we've got one here in the U.S., but my generation can totally not depend on it. We still have to save for retirement ourselves. Maybe rather than counting on the government for retirement and other entitlements (other than protection again the unforeseen like health-care and unemployment), China's (granted it's a little too light on the entitlements) way is better in that it keeps citizens on their toes to save, and those big savings in the banks in turn generate the credit that fuels the economy. That's a healthy economy, not one based on borrowing and consumption.
Obama talks about the need to to get credit flowing again in this country, but true credit comes from savings, not from the central banks' printing money... So rather than spending, instead, as indebted as we are, we should save our way back to a sound economy. The alternative (borrowing more from foreigners and printing money, which is the action taken right now), will just keep us in this phantom economy that'll only last as long as the dollar doesn't collapse..., and there are already signs of it.
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