I always wanted to know why America is considered to be the strongest economy. Rather, How did US became worlds most powerful economy.
As a thinker I had some thought that, there is something in spending culture which was major difference between Americans and Indians apart from party culture.
The article below is an email sent by my friend which I would like to share with you all.
.....
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 import 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 assets of over $100 billion in US securities.
China has sunk over $160 billion in US securities. Japan's stakes, 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, the countries
have to remit $180 billion every quarter that is $2 billion a day to
the US ! Otherwise the US economy would go for a sick. So will the
global economy. The result will be no different if US consumers begin
consuming less. 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.
India 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.
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 his shop. 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.
'Saving is sin, and spending is virtue.'
Before you follow this neo economics, get some fools to save so that
you can borrow from them and spend. This is what US has successfully
done in last few decades. Wow!!!! Smart guys.
