An Interesting Blog

I came across an interesting article in Kosong Cafe, by a Malaysian blogger. I reproduced his article to share with my readers. Readers can also log in his blog for more interesting and insightful ideas.

Wednesday, October 31 2007

Escalating prices are almost hitting the ceiling.

We are facing the inevitable price increases across the board as a result of record price increases in crude oil and other commodities because of the fast expanding economies of China and India.

We were advised by Najib not so long ago to change our lifestyle. His recent trumpeting in Paris at the launch of our new submarines seem to suggest it applies to us only. There are also his pet project in Brickendonbury and other 'brain-wash the students' events in UK which suggest our country has deep pockets when it comes to BN causes.

Pak Lah just said we have the money to send more astronauts. Soon after, we read about a school getting donations from the private sector because of urgent needs. Then, we found our policemen do not have enough bullet-proof vests.

Khairy told off PPP's Kayveas to walk before attempting to run when the latter asked for more seats or more correctly asked for what they were entitled to when the party joined BN. Coming from someone who aims to be PM before 40... who is more like running before he can crawl?
Posted by KoSong Cafe at 8:29 AM 0 comments Links to this post
Saving is a sin, Spending is a virtue

An interesting Article from India...Saving is sin, and spending is virtue... Provoking your thoughts.

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

Americans spend, save little. Also US imports more than it exports. Has an annual trade deficit of over $400 billion. Yet, the American economy is considered strong and trusted to get stronger.

But where from do Americans get money to spend?

They borrow from Japan, China and even India. Virtually others save for the 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 $160 billion in US securities. Japan's stakes in US securities is in trillions.

Result:

The US has taken over $5 trillion from the world. So, as the world saves for the US, Americans spend freely. Today, to keep the US consumption going, that is for the US economy to work, other countries have to remit $180 billion every quarter, which is $2 billion a day, to the US!

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 India. 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 spending, that they hardly save. In fact they use their credit cards to spend their future income. 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. If 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 of course. Yet it's 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 (habits don't change, even with taxes, do they?). Their traditional postal savings alone is over $1.2 trillions, about three times the Indian GDP. Thus, savings, far from being the strength of Japan, has become its pain.

Hence, 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 Indian-born economist in the US, told Manmohan Singh that Indians wastefully save. Ask them to spend, on imported cars and, seriously, even on cosmetics! This will put India on a growth curve. This is one of the reason for MNC's coming down to India, seeing the consumer spending.

'Saving is sin, and spending is virtue.'

But before you follow this neo economics, get some fools to save so that you can borrow from them and spend!!!

Beng

Posted by KoSong Cafe at 8:25 AM 0 comments Links to this post