Thursday, 26 March 2009

A frustrated lefty

Being a member of the Labour Party in England, and a determined Democrat in these
United States, is almost a part of my DNA.

I am decidedly left of centre.

So it pains me to see that the British Labour party has forgotten, or chosen to depart from its historical mission.

And I am so disappointed with the policies regarding the economy of President Barack Obama.

“Change” and “Yes we can” seem to have evaporated overnight.

The world economy is in deep doo-doo, but Premier Brown and President Obama seem bereft of any ideas other than those of the failed Keynsian or Reaganite orthodoxies.

In both countries, interest rates are at an all time low - in order- we are told – to stimulate credit, i.e. spending.

Can we spend ourselves out of this crisis?

I doubt it!

Maybe we should increase interest rates so that citizens will save, and use those savings to alleviate the liquidity problem.

Certainly I believe that saving makes far more sense for national economies than spending (on credit).

In China the “average” wage earner saves 25% of her/his disposable income.

In these United States the “average” wage earner saves a meagre 0.7%.

So my guess is that Chinese saving is enabling American borrowing.

If the Chinese continue to save, and we Americans continue to spend - which nation will eventually be more prosperous?

Of course, this is just an uninformed lay view of economic matters.

In the picture below, the cats are American, British and western European.

The bird is Chinese!

1 comment:

  1. I am sorry but you would have failed my Economics class. What is best for the individual (saving) is not usually best for the economy. If everyone including the government saves, the result will be more unemployment. Since when did Keynesian economics fail? The problem over the past 30 or more years is that Economists forgot Keynesian principles. Something I have been saying for many years but then I obtained my Economics degree in 1966 when Keynes was still the guru.