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askbob
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1/21/2011 3:40:51 PM
Posted: 5 years ago
A higher long term savings is more beneficial for the economy than a low long term savings rate.

Has this been proven, what evidence can I use to prove this hypothesis. It's for my thesis.
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Ragnar_Rahl
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1/21/2011 3:47:23 PM
Posted: 5 years ago
At 1/21/2011 3:40:51 PM, askbob wrote:
A higher long term savings is more beneficial for the economy than a low long term savings rate.
100 percent savings, everyone dies.

^_^
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askbob
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1/21/2011 4:05:22 PM
Posted: 5 years ago
haha clearly, but is it better to go through debt based spending cycles, spend only what you have, or save enough for the downtimes?
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lovelife
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1/21/2011 4:16:18 PM
Posted: 5 years ago
At 1/21/2011 3:40:51 PM, askbob wrote:
A higher long term savings is more beneficial for the economy than a low long term savings rate.

I agree

Has this been proven, what evidence can I use to prove this hypothesis. It's for my thesis.

Math? If you have $50 at 15% interest for 10 years you will have less than if you have $50 at 45% interest for 10 years. Just show some math for that and I'd think thats evidence enough.
Then again I'm lazy so thats just what I would do.
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LaissezFaire
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1/21/2011 4:39:41 PM
Posted: 5 years ago
It can't be proven because it's wrong.

http://murrayrothbard.com...
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
askbob
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1/21/2011 8:39:20 PM
Posted: 5 years ago
At 1/21/2011 4:39:41 PM, LaissezFaire wrote:
It can't be proven because it's wrong.

http://murrayrothbard.com...

That has to be the most worthless article..ever.

All it does is view savings in a micro-economic environment and then bitches about government spending. Completely dodges the question.

I'm not asking what would produce more happiness, but what rather is better for the health of the economy.
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askbob
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1/21/2011 8:46:43 PM
Posted: 5 years ago
At 1/21/2011 4:16:18 PM, lovelife wrote:
At 1/21/2011 3:40:51 PM, askbob wrote:
A higher long term savings is more beneficial for the economy than a low long term savings rate.

I agree

Has this been proven, what evidence can I use to prove this hypothesis. It's for my thesis.

Math? If you have $50 at 15% interest for 10 years you will have less than if you have $50 at 45% interest for 10 years. Just show some math for that and I'd think thats evidence enough.
Then again I'm lazy so thats just what I would do.

This question is addressed to people who know economics. No offense LL. But a simple interest equation won't prove it.
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FREEDO
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1/21/2011 8:57:08 PM
Posted: 5 years ago
It can't really be measured accurately since everyone's situation is different. Different scenarios call for different kind of savings. Though, I'd be inclined to say saving higher amounts for the long run is more in the direction we should going.
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LaissezFaire
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1/21/2011 8:58:18 PM
Posted: 5 years ago
At 1/21/2011 8:39:20 PM, askbob wrote:
At 1/21/2011 4:39:41 PM, LaissezFaire wrote:
It can't be proven because it's wrong.

http://murrayrothbard.com...

That has to be the most worthless article..ever.

All it does is view savings in a micro-economic environment and then bitches about government spending. Completely dodges the question.

I'm not asking what would produce more happiness, but what rather is better for the health of the economy.

lol. How exactly are you defining "better for the health of the economy"? Say the savings rate is currently 5%. It's at that level because people, on average, want to spend 95% of their income right now on consumer goods and 5% later. In what sense could you possibly say that they're wrong, that savings should instead be higher or lower? The point of an economy is to provide goods and services that people want. In what sense could you say that the ratio of consumer goods people want to buy now to consumer goods people want to buy later is wrong? How could anyone but individuals themselves decide what savings rate is "best"?
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
askbob
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1/21/2011 9:15:10 PM
Posted: 5 years ago
At 1/21/2011 8:57:08 PM, FREEDO wrote:
It can't really be measured accurately since everyone's situation is different. Different scenarios call for different kind of savings. Though, I'd be inclined to say saving higher amounts for the long run is more in the direction we should going.

Again this is microeconomics Freedo. I'm observing macro economics.

http://research.stlouisfed.org...

This article nicely sums up my problem.
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askbob
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1/21/2011 9:18:16 PM
Posted: 5 years ago
At 1/21/2011 8:58:18 PM, LaissezFaire wrote:
lol. How exactly are you defining "better for the health of the economy"? Say the savings rate is currently 5%. It's at that level because people, on average, want to spend 95% of their income right now on consumer goods and 5% later. In what sense could you possibly say that they're wrong, that savings should instead be higher or lower? The point of an economy is to provide goods and services that people want. In what sense could you say that the ratio of consumer goods people want to buy now to consumer goods people want to buy later is wrong? How could anyone but individuals themselves decide what savings rate is "best"?

Let me rephrase:

Which will produce a higher GDP in the long term? A savings rate of 5% or a savings rate of 10%
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LaissezFaire
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1/21/2011 9:24:15 PM
Posted: 5 years ago
At 1/21/2011 9:18:16 PM, askbob wrote:
At 1/21/2011 8:58:18 PM, LaissezFaire wrote:
lol. How exactly are you defining "better for the health of the economy"? Say the savings rate is currently 5%. It's at that level because people, on average, want to spend 95% of their income right now on consumer goods and 5% later. In what sense could you possibly say that they're wrong, that savings should instead be higher or lower? The point of an economy is to provide goods and services that people want. In what sense could you say that the ratio of consumer goods people want to buy now to consumer goods people want to buy later is wrong? How could anyone but individuals themselves decide what savings rate is "best"?

Let me rephrase:

Which will produce a higher GDP in the long term? A savings rate of 5% or a savings rate of 10%

In the long run? 10%, of course. Delaying consumption now to invest in future will obviously make us better off in the future.
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
askbob
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1/21/2011 9:29:38 PM
Posted: 5 years ago
To rephrase further:

When an economy enters a recessionary cycle, there are only a number of limited ways to make up for the loss in personal consumption.

The government can borrow from other countries to supply the difference.

People can dip into their own savings to sustain their consumption.

The government can increase the spending rate to 100% by taxing and spending for the consumer

The government can increase the spending rate to 100% by giving no incentive to save (lowering the Federal Funds Rate).

In the coming years a large amount of the nations elderly will be dependent upon social security and Medicare. Furthermore the government is becoming increasingly in debt. If this continues, it will eliminate it's option of borrowing from other countries.

The strain on capital will be high, and there will be little the fed can do to reverse the downward spiral of the economy. The more an individuals save, the cheaper debt will be for corporations, so they can more easily invest in new projects.
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bluesteel
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1/21/2011 9:37:14 PM
Posted: 5 years ago
Japan and China have high savings rates now; the U.S. has one of the lowest savings rate in the world. You can try to use trends from the past 10-15 years in these countries to evaluate your thesis, but the complicating factors are 1) the recession and 2) the high debt ratios in the U.S. are key to Chinese economic growth because they fuel their export industries. So it's all inter-connected.

I don't really get what LF was saying, since the Austrian School says that the "correct" savings rate represents the time value of money and nothing else. If the savings rate instead represents fluctuations in the money supply (artificial tinkering with the interest rate), firms will misjudge the time preferences of consumers' aggregate demand and over-invest in capital, causing recessions.

The most interesting question to me is why China's high savings rate seems to be more beneficial to it than Japan's high savings rate - at least this is the impression I get from what I've read.

So @the OP

You have two choices for studying that thesis:
1. Cross-country comparisons of high savings and high debt countries
2. Single country evaluation of savings rates vs. GDP growth rates in the U.S. based on hundreds of years of data. The GDP growth rates should lag the high savings rates by a few years if your thesis is correct.
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askbob
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1/21/2011 9:39:26 PM
Posted: 5 years ago
I'm trying to complete this logical syllogism and produce proof for every point:

1. Financial Literacy Courses that are mandated in high school will increase the general population's personal savings rate.

2. A higher personal savings rate over the long term will increase GDP more than a lower personal savings rate traded for a higher consumption rate.

3. Since the marginal cost of mandating financial literacy courses is _________ (estimated) and the marginal benefit of the increased GDP is ________(estimated) then it makes economic sense for the U.S. government to mandate financial literacy courses in high school
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bluesteel
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1/21/2011 9:41:48 PM
Posted: 5 years ago
At 1/21/2011 9:29:38 PM, askbob wrote:
To rephrase further:

When an economy enters a recessionary cycle, there are only a number of limited ways to make up for the loss in personal consumption.

The government can borrow from other countries to supply the difference.

People can dip into their own savings to sustain their consumption.

The government can increase the spending rate to 100% by taxing and spending for the consumer

The government can increase the spending rate to 100% by giving no incentive to save (lowering the Federal Funds Rate).


In the coming years a large amount of the nations elderly will be dependent upon social security and Medicare. Furthermore the government is becoming increasingly in debt. If this continues, it will eliminate it's option of borrowing from other countries.

The strain on capital will be high, and there will be little the fed can do to reverse the downward spiral of the economy. The more an individuals save, the cheaper debt will be for corporations, so they can more easily invest in new projects.

If instead your question is whether austerity measures work, I suggest you look into Paul Volcker's reign as head of the Fed. Charles Morris credits his austerity programs (high interest rates) with the economic boom of the 1990's.
You can't reason someone out of a position they didn't reason themselves into - Jonathan Swift (paraphrase)
LaissezFaire
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1/21/2011 9:49:43 PM
Posted: 5 years ago
At 1/21/2011 9:39:26 PM, askbob wrote:
I'm trying to complete this logical syllogism and produce proof for every point:

1. Financial Literacy Courses that are mandated in high school will increase the general population's personal savings rate.
Like how DARE reduces the general population's drug usage? http://en.wikipedia.org...
Should we subsidize education?
http://www.debate.org...

http://mises.org...

http://lewrockwell.com...

http://antiwar.com...

: At 6/22/2011 6:57:23 PM, el-badgero wrote:
: i didn't like [Obama]. he was the only black dude in moneygall yet he claimed to be home. obvious liar is obvious liar. i bet him and bin laden are bumfvcking right now.
bluesteel
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1/21/2011 9:54:19 PM
Posted: 5 years ago
At 1/21/2011 9:39:26 PM, askbob wrote:
I'm trying to complete this logical syllogism and produce proof for every point:

1. Financial Literacy Courses that are mandated in high school will increase the general population's personal savings rate.

2. A higher personal savings rate over the long term will increase GDP more than a lower personal savings rate traded for a higher consumption rate.

3. Since the marginal cost of mandating financial literacy courses is _________ (estimated) and the marginal benefit of the increased GDP is ________(estimated) then it makes economic sense for the U.S. government to mandate financial literacy courses in high school

We find a strong relationship between lagged per capita GDP growth and national savings. Each one percent increase in the lagged growth rate is associated with about a one-third percentage point increase in national savings.
http://www.cid.harvard.edu...

regression based on Asian economies for your second/third points
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Ragnar_Rahl
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1/21/2011 10:58:50 PM
Posted: 5 years ago
At 1/21/2011 9:15:10 PM, askbob wrote:
At 1/21/2011 8:57:08 PM, FREEDO wrote:
It can't really be measured accurately since everyone's situation is different. Different scenarios call for different kind of savings. Though, I'd be inclined to say saving higher amounts for the long run is more in the direction we should going.

Again this is microeconomics Freedo. I'm observing macro economics.

There is no standard in economics greater than the sum of interactions between individual preferences and individual abilities. However, as a result of this:


haha clearly, but is it better to go through debt based spending cycles, spend only what you have, or save enough for the downtimes?
Inevitably, "macroeconomically" there will be more savings then spending, for one can't spend what does not exist-- there is no borrowing except borrowing what someone else saved.
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Ragnar_Rahl
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1/21/2011 10:59:38 PM
Posted: 5 years ago
and any tools that tell you otherwise are inevitably only measuring part of the picture.
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askbob
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1/21/2011 11:35:07 PM
Posted: 5 years ago
At 1/21/2011 10:58:50 PM, Ragnar_Rahl wrote:
Inevitably, "macroeconomically" there will be more savings then spending, for one can't spend what does not exist-- there is no borrowing except borrowing what someone else saved.

Globally this is correct Ragnar, however not on a country by country basis on which GDP is measured.
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bluesteel
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1/21/2011 11:55:41 PM
Posted: 5 years ago
At 1/21/2011 10:58:50 PM, Ragnar_Rahl wrote:

Inevitably, "macroeconomically" there will be more savings then spending, for one can't spend what does not exist-- there is no borrowing except borrowing what someone else saved.

This isn't true if you use fractional reserve banking, which we do. The whole point is to allow people to borrow money that doesn't actually exist.
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askbob
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1/22/2011 12:02:43 AM
Posted: 5 years ago
At 1/21/2011 11:55:41 PM, bluesteel wrote:
At 1/21/2011 10:58:50 PM, Ragnar_Rahl wrote:

Inevitably, "macroeconomically" there will be more savings then spending, for one can't spend what does not exist-- there is no borrowing except borrowing what someone else saved.

This isn't true if you use fractional reserve banking, which we do. The whole point is to allow people to borrow money that doesn't actually exist.

actually it does exist, all banks have to deposit a certain amount of money with the reserve who then loan it out at need to other banks.
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bluesteel
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1/22/2011 12:08:36 AM
Posted: 5 years ago
At 1/22/2011 12:02:43 AM, askbob wrote:
At 1/21/2011 11:55:41 PM, bluesteel wrote:
At 1/21/2011 10:58:50 PM, Ragnar_Rahl wrote:

Inevitably, "macroeconomically" there will be more savings then spending, for one can't spend what does not exist-- there is no borrowing except borrowing what someone else saved.

This isn't true if you use fractional reserve banking, which we do. The whole point is to allow people to borrow money that doesn't actually exist.

actually it does exist, all banks have to deposit a certain amount of money with the reserve who then loan it out at need to other banks.

But the word "fractional" in fractional reserve means that they can loan out far more money than they actually have in reserve anywhere (since the reserve amount will be a "fraction" of what they're allowed to loan out).
You can't reason someone out of a position they didn't reason themselves into - Jonathan Swift (paraphrase)
askbob
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1/22/2011 12:18:45 AM
Posted: 5 years ago
At 1/22/2011 12:08:36 AM, bluesteel wrote:
But the word "fractional" in fractional reserve means that they can loan out far more money than they actually have in reserve anywhere (since the reserve amount will be a "fraction" of what they're allowed to loan out).

No they can loan out only as much money as they have in deposits. They are just required to reserve a fraction of their deposits. It doesn't meant that this money doesn't exist. It still does, it's just someone else's money that has been deposited.
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1/22/2011 1:06:26 AM
Posted: 5 years ago
At 1/22/2011 12:18:45 AM, askbob wrote:
At 1/22/2011 12:08:36 AM, bluesteel wrote:
But the word "fractional" in fractional reserve means that they can loan out far more money than they actually have in reserve anywhere (since the reserve amount will be a "fraction" of what they're allowed to loan out).

No they can loan out only as much money as they have in deposits. They are just required to reserve a fraction of their deposits. It doesn't meant that this money doesn't exist. It still does, it's just someone else's money that has been deposited.

What you're describing is credit banking, not fractional reserve banking.

Banks engage in fractional reserve banking when they use deposited money to grant credits. They do so either by lending out deposited money directly or by producing money titles in excess of the money they have in their vaults. For example, the customers of the FR Bank (FRB) have deposited $1,000, and the FRB has issued corresponding statements of account. Now the bank grants a $500 credit to Johnson in the form of a newly "created" bank account with a $500 balance. This action immediately creates a situation in which contradictory claims to physical dollar bills exist. The depositors have present claims to $1,000 because they did not renounce their title to the full amount of their deposits. But Johnson has a present claim to another $500. Clearly, it is impossible for all these claims to be satisfied with the existing quantity of dollars in the vaults of the bank.
http://www.independent.org...

The table below displays how loans are funded and how the money supply is affected. It also shows how central bank money is used to create commercial bank money from an initial deposit of $100 of central bank money. In the example, the initial deposit is lent out 10 times with a fractional-reserve rate of 20% to ultimately create $400 of commercial bank money.
http://en.wikipedia.org...
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bluesteel
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1/22/2011 1:13:14 AM
Posted: 5 years ago
or start @2:30 ---->
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Ragnar_Rahl
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1/22/2011 1:15:33 AM
Posted: 5 years ago
At 1/21/2011 11:35:07 PM, askbob wrote:
At 1/21/2011 10:58:50 PM, Ragnar_Rahl wrote:
Inevitably, "macroeconomically" there will be more savings then spending, for one can't spend what does not exist-- there is no borrowing except borrowing what someone else saved.

Globally this is correct Ragnar, however not on a country by country basis on which GDP is measured.
Economics, like wild beasts, has very little to do with borders unless the borders get pissy.

It is typically good for middle aged people to be saving and younger people to be borrowing, any situation where the ages reflect this is probably good. Yes, the average wealth in a country will eventually be greater in creditor countries (unless the debts are forgiven by legislation or by a war won by the debtors), but this could just be because that's where the old people move. Countries are not the units that own wealth.

Oh, and if I sell a car to you, and you sell a car to me over and over again, the same car, what does GDP say about it?
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
askbob
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1/22/2011 1:18:37 AM
Posted: 5 years ago
At 1/22/2011 1:15:33 AM, Ragnar_Rahl wrote:
Oh, and if I sell a car to you, and you sell a car to me over and over again, the same car, what does GDP say about it?

Nothing after the initial sale?
Me -Phil left the site in my charge. I have a recorded phone conversation to prove it.
kohai -If you're the owner, then do something useful like ip block him and get us away from juggle and on a dofferent host!
Me -haha you apparently don't know my history
Kohai - Maybe not, but that doesn't matter! You shoukd still listen to your community and quit being a tyrrant!
Me - i was being completely sarcastic
Kohai - then u misrepresented yourself by impersonating the owner—a violation of the tos
Ragnar_Rahl
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1/22/2011 1:19:04 AM
Posted: 5 years ago
as for fractional reserve banking, from your own link:

"Fractional-reserve banking is the banking practice in which only a fraction of a bank's demand deposits are kept as reserves"

It refers to loaning out part of the deposits. In reality, no money is created, rather, it is simply gambled that the depositors will in sum continue not to recall the loan that they made with an option to recall, until profits cover the gap. The proof that no money is created comes if you lose that gamble (which, if your plan is to practice much FRB in perpetuity, will inevitably happen someday).

The loans do not exceed the number of deposits. They exceed the cash reserves that have to cover recalling deposits.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.