Thoughts on Savings
There are no savings.
Editor's Note: Minyanville is a community of people who share an interest in fiscal literacy. As perspective is an important aspect of our daily routine, we share this exchange with hopes that it adds balance to your process.
Below are links to a two-part article I've written, "Thoughts on Savings."
Thoughts on Savings (part 1 of 2)
Thoughts on Savings (part 2 of 2)
Question for you or Scott Reamer:
Have I said anything in here that you would dispute from an Austrian point of view? I am getting some emails violently disagreeing with my contention that paying down one's mortgage is not saving. Those links above are lengthy so I do not expect a quick reply and in fact I am aware that you are not obligated to reply at all.
My argument would go something like this:
When you borrow money from the bank you contract to transfer your money to a creditor at a future date. In an ideal world sans fractional reserve money out of thin air, you have laid claims to someone else's savings by the act of borrowing, and in this case have bought a house - essentially a consumption item, even if it doesn't get "used up." Consumption reduces the pool of real funding, it doesn't enhance it. When paying back your mortgage loan you're not saving, you're fulfilling a contractual obligation of deferred payment for past consumption.
Is that nitpicking or do you view paying down one's mortgage as savings?
Of course in this crazy world of fiat money created at will, it is hard to say just what the pool of real savings is but it should be far less than the number of zeros in savings accounts sloshing around.
On part 2 I would say this.
There is no glut of savings in Asia; that is a very disingenuous way to put it. In fact, there is no savings anywhere.
A consumer in the U.S. buys a TV from a Japanese producer. The Japanese businessman does not want dollars in payment, so he takes those dollars to the Bank of Japan and exchanges those dollars for yen. The BOJ can sell the dollars in the market place to give yen to the businessman, OR the BPJ can print yen and take the dollars and buy U.S. bonds.
What has happened is that the public sector has merged with the private sector; central banks are lending fiat currency to everyone at very low rates by printing. The U.S. consumer (U.S. government) is not borrowing excess savings from Asian consumers; the central banks of each country are printing currency.
There are no savings. The bloated public debt of all producer countries proves that.
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