When did Scrooge become a role model?(papers.ssrn.com)
papers.ssrn.com
When did Scrooge become a role model?
http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1355327_code672404.pdf?abstractid=1332842&mirid=1
4 comments
I suspect that you didn't read to the end of the paper. They're using the 'seven dwarves and scrooge' example in the context of sovereign debt. They aren't criticising individuals for saving and investing.
The entire thesis is that China hoarding large surpluses is essentially unsustainable and damaging to global productivity. This is probably true, unless China is willing to accept IOUs (which is what US bonds are, essentially) ad infinitum.
The entire thesis is that China hoarding large surpluses is essentially unsustainable and damaging to global productivity. This is probably true, unless China is willing to accept IOUs (which is what US bonds are, essentially) ad infinitum.
I don't agree that China is hurting the global economy in fact I think they are making the west richer by stealing from their own people. You can morally object to that, but whenever a country subsidizes exports they are improving the lot of foreigners at the expense of their own citizens.
I suspect that China currency manipulation has reduced global economic efficiency. It's mostly second order effects ex: Cheap Chinese exports still require the same raw materials which drives up global commodities prices.
Now if China was growing faster than other nations have when they transitioned to "modern" economy's that would be one thing. But South Korea experienced similar growth rates when they where developing and the "end state" for China is an economy that looks like US/Germany/Japan etc. So IMO, discounting their goods is keeping their population poorer for longer and harming the world economy at the same time.
Now if China was growing faster than other nations have when they transitioned to "modern" economy's that would be one thing. But South Korea experienced similar growth rates when they where developing and the "end state" for China is an economy that looks like US/Germany/Japan etc. So IMO, discounting their goods is keeping their population poorer for longer and harming the world economy at the same time.
I agree it's keeping the economy poorer, but is it harming the world economy? People are getting goods at lower prices, that frees up more money for investment. So I'd say if anything it's improving the world economy. Once again, I feel the only objection is that it is unfair to chinese citizens because the are essentially being stolen from. As for you comment on 2nd order effects, I think that is incorrect -- China only competes on labor costs, they don't sell goods for less than the material costs. Now if you're saying that they can use less efficient (more wasteful) processes since the difference is made up in labor, I'll agree -- but I think they'll adopt the more efficient processes to increase their bottom line eventually.
What's the use of getting a good at a lower price if you've lost your job?
To get back to your original question, I think the global economy may have been hurt due to China's mercantilist policies. Some perceive China to be adopting non-cooperative "I win, you lose" strategies that will motivate defensive and non-cooperative measures from other countries. This is bad, potentially very bad.
Also, even if the global economy is better now than it was when China was undeveloped, that doesn't mean China's policies are ideal. The world economy might be even better than it is now if China changes its policies, increases its internal demand and spends down its surplus.
To get back to your original question, I think the global economy may have been hurt due to China's mercantilist policies. Some perceive China to be adopting non-cooperative "I win, you lose" strategies that will motivate defensive and non-cooperative measures from other countries. This is bad, potentially very bad.
Also, even if the global economy is better now than it was when China was undeveloped, that doesn't mean China's policies are ideal. The world economy might be even better than it is now if China changes its policies, increases its internal demand and spends down its surplus.
Did you actually read the article? Hoarding 75% of the currency in an economy cannot, under any circumstance, be called "delayed consumption".
Before Scrooge, everyone earned its keep and got whatever he wanted. Life was good. It is true that not everybody have the same income or savings, but in general everyone was well fed and was able to buy whatever he needed. The savings where delayed consumption, you know... save $1 per day and by the end of the month you can hire two full time fellows for that home improvement project you had in mind.
Pre-Scrooge Dwarf Economy. Daily income = Avg: $12, Min: $9, Max: $15 Cost of living: $3 Disposable income = Avg: 75%, Min 67%, Max 80% Savings = Total: $16, Avg: $2.29 Population = 7 Employment = 100%
Now Scrooge comes. He hoards money for money's sake. He works in the dwarf economy full time, but only spends $4 per day for room and board. Eventually he holds all the money under his mattress and everybody is engaged in subsistence farming.
With-Scrooge Dwarf Economy. Daily income = Avg: $3.5, Min: $3, Max: $4 Cost of living: $3 Disposable income = Avg: 67%, Min 50%, Max 81% Savings = $72 ($75 - $3) Population = 8 Employment = 28%
Now, if you ask me, the Dwarfs are pretty stupid. They sit on their hands all day long... waiting for someone to "hire" them. If you think in a community of 8, this is nonsense. But if you think in a city of 8 million, then you are on to something. People can barely find a job. factories run below half capacity, the ones who are lucky enough to have some savings hold to them for dear life... just in case the things get even worse and they cannot earn some more. Eventually, people move into informal DIY economy with poor skills and substandard tools, Big Depression style.
Before Scrooge, everyone earned its keep and got whatever he wanted. Life was good. It is true that not everybody have the same income or savings, but in general everyone was well fed and was able to buy whatever he needed. The savings where delayed consumption, you know... save $1 per day and by the end of the month you can hire two full time fellows for that home improvement project you had in mind.
Pre-Scrooge Dwarf Economy. Daily income = Avg: $12, Min: $9, Max: $15 Cost of living: $3 Disposable income = Avg: 75%, Min 67%, Max 80% Savings = Total: $16, Avg: $2.29 Population = 7 Employment = 100%
Now Scrooge comes. He hoards money for money's sake. He works in the dwarf economy full time, but only spends $4 per day for room and board. Eventually he holds all the money under his mattress and everybody is engaged in subsistence farming.
With-Scrooge Dwarf Economy. Daily income = Avg: $3.5, Min: $3, Max: $4 Cost of living: $3 Disposable income = Avg: 67%, Min 50%, Max 81% Savings = $72 ($75 - $3) Population = 8 Employment = 28%
Now, if you ask me, the Dwarfs are pretty stupid. They sit on their hands all day long... waiting for someone to "hire" them. If you think in a community of 8, this is nonsense. But if you think in a city of 8 million, then you are on to something. People can barely find a job. factories run below half capacity, the ones who are lucky enough to have some savings hold to them for dear life... just in case the things get even worse and they cannot earn some more. Eventually, people move into informal DIY economy with poor skills and substandard tools, Big Depression style.
True. In our specialized economy everyone's dependent on each other.
How did Scrooge do any work? Bashful purchased the ingredients, assembled them, packed the product and delivered it. Scrooge did NOTHING. Scrooge could have been in a coma and it would not affect production. Are you claiming coma victims are capable of work? Scrooge could have been dead during production! Are you claiming dead people are capable of work?!
If you can't distinguish labor from capital then you should not be commenting on economic articles.
If you can't distinguish labor from capital then you should not be commenting on economic articles.
The problem with your analysis is that a business needs investors and customers to succeed. Excessive saving can harm an economy.
Excessive saving cannot harm the economy, as more people save the interest rates go down -- the earn less, and there is plenty of money to be invested. People do not put money in their mattress, they invest it either through a savings account or in the stock market.
Think of this way. What if today, everyone decided to spend nothing and invest all their money. What will happen to the world economy? You can't make money investing in a business if no one is buying their product. That proves that there is a point at which savings can be harmful.
Excessive savings will drive down the interest rates, and they have. Despite the fact that government borrowing is through the roof, interest rates barely hover above zero because of excessive savings.
I don't mean to deny the importance of savings but be careful that you don't take demand for granted.
Excessive savings will drive down the interest rates, and they have. Despite the fact that government borrowing is through the roof, interest rates barely hover above zero because of excessive savings.
I don't mean to deny the importance of savings but be careful that you don't take demand for granted.
Interest rates right now are not a function of saving, they are manipulated by the federal reserve. If you look at hayek's model of the business cycle you'll know that what we have going on right now is not good; primarily because we are printing money like crazy instead of letting the dollar adjust in value as it should.
The Fed can't manipulate interest rates down. They have to offer a high enough rate to sell their notes. Right now there is such over-saving that the fed can clear the sales by offering almost zero (really negative rates if you factor in inflation) interest rates. For all the talk I hear of the Fed printing at record rates, I have yet to see anyone point to a treasury auction that failed.
"we are printing money like crazy instead of letting the dollar adjust in value as it should." I can read that as you advocating for a variety of different things, and so I can't tell exactly what point you are trying to make.
Any way, thanks for the discussion and good luck in your engineering career.
"we are printing money like crazy instead of letting the dollar adjust in value as it should." I can read that as you advocating for a variety of different things, and so I can't tell exactly what point you are trying to make.
Any way, thanks for the discussion and good luck in your engineering career.
The fed doesn't sell treasury bonds in fact it buys them: http://online.wsj.com/article/SB123739788518173569.html
Right now what is going on is the fed is loaning money to banks at 0%, the banks are buying treasury bonds which pay 4% and so they get free money fix their balance sheet at our expense. Every dollar the FED prints the less the money you own is worth.
Right now what is going on is the fed is loaning money to banks at 0%, the banks are buying treasury bonds which pay 4% and so they get free money fix their balance sheet at our expense. Every dollar the FED prints the less the money you own is worth.
Earlier you argued that people are not saving too much. However, your article says that people are in fact saving so much that the Fed is trying to turn them away. According to the article, the Fed first dissuaded savers by lowering the interest rate to zero, and when that proved ineffective they bought back the treasuries they had previously issued. I assume you have withdrawn your earlier argument.
I think your point now is that the government should not have bailed out the financial sector. That's a different discussion that should have its own thread. Perhaps your point is that the Fed and the Treasury are working against each other? I don't distinguish between the two and believe Bernanke/Geithner work hand in hand, but again that's a different discussion.
Also, for accuracy's sake, treasuries are not paying anything close to 4%, unless you're looking at very long term rates which are neither here nor there.
You jump around a lot, which makes it difficult to see the point you are trying to make. Unless you want to revive your "society can never save too much" argument, I would like to end this discussion.
I think your point now is that the government should not have bailed out the financial sector. That's a different discussion that should have its own thread. Perhaps your point is that the Fed and the Treasury are working against each other? I don't distinguish between the two and believe Bernanke/Geithner work hand in hand, but again that's a different discussion.
Also, for accuracy's sake, treasuries are not paying anything close to 4%, unless you're looking at very long term rates which are neither here nor there.
You jump around a lot, which makes it difficult to see the point you are trying to make. Unless you want to revive your "society can never save too much" argument, I would like to end this discussion.
Not in Silicon Valley. Here success starts and ends with attaining investors. Customers and sales are immaterial.
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"Returning to the original measuring stick, let us see if society is productive. Bashful is working to make ice cream. But Scrooge is not productive. If the venture is successful, then Scrooge will get money for nothing. He has gotten his money “to work for him.”23 In fact that is not what is happening. Money cannot work. Bashful is doing all the work and Scrooge is taking some of the rewards of Bashful’s labor. Is this fair? In history, this arrangement is thought to be fair because it is an equity investment.24"
This person doesn't have the faintest idea of what investment means. Scrooge didn't do nothing, he delayed his consumption -- he worked in essence for free, until his investment has returns.
In general when investing you're improving efficiencies for instance buying a faster assembly line. This allows you to make the more goods for less price thus customers are benefited and the investors take a return. It's a win win situation.