Saving is sin,

October 1, 2009 12:21pm CST
Saving is sin, and spending is virtue... This is an interesting statement made by an Indian economist. 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. India has 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.' Do you agree, after reading this story?
2 people like this
3 responses
@maximax8 (28558)
• United Kingdom
3 Oct 09
Thanks for starting this very interesting discussion. Many Americans like to spend and even borrow money to spend even more. Japanese people I notice love to save and spend as little as possible. I am surprised to hear from the Indian that "saving is a sin and spending is a virtue". I like to spend within my means. I enjoy saving for my future. Hopefully I will soon be able to sell my house and buy a house more suitable for my disabled toddler son. I have a credit card but haven't ever used it. I keep it for emergency funds.
@JamesKYTan (1607)
• Malaysia
2 Oct 09
America spends and China and Japan save. America is the world greatest debtor and Japan or China is the world's greatest lender.Yes, in order for the economy to grow we need to spend spend spend. Keep on spending. Spending generates economic interest. Why save when the saving interest is less than 1% pa?
@LittleMel (14055)
• Canada
1 Oct 09
I suppose it depends on each person and each country. managing money is not a sin, in fact if we don't do it, we will be in debt. which will make us do anything, even if it's a crime, to pay for it and its interest. I understand that interest should also be charged properly, not sucking blood purpose, but if we manage money carefully, we won't be depending on anybody in the first place. managing money menas saving and spending. there is no way we don't spend, as long as we are still alive there is always something needs buying. and there is no way we don't save, because rainy days are part of life. to live a life, is to spend and save. we just have to find the balance. if we need, we have to buy it. if we have extra money, there is nothing wrong buying what we want from time to time. borrowing money is the same as spending money, because we borrow to spend, and yet we have to pay interest on top. so borrowing is not as good as saving in the first place. but since we can't save all the time, we should only borrow if it's a necessity and we know we can afford the long term payment with interest. when it comes to country's economy however, with politic involved, there is no simple way to do it. that's why I hate politics. money itself is not dirty, politics is what cluttering it. because the country economy is not managed well, opportunity and education are not available for majority of people thus crime increases and hence those selling weapons make money over life. this is the cycle that we have to break. It's costing us more than any amount of money can pay. If nobody who has the power to break this cycle, steps up, s crew economy and budget, there will be nothing left of humanity itself. long response I know. in a way I half agree half disagree with him.