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Flatlining GDP is Our Fault
Comments
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Did your teacher then discuss the liquidity trap? Where people save regardless of rates as they are saving for reasons other than to earn interest
nope...
This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
nope...
It was one of Keynes's brighter ideas. Basically he said that in certain economic conditions, people will look to save regardless of interest rates. It was something that came out of his experiences in the 1930s which I'm not sure is precisely applicable to today. What is happening now is that people are going back to more normal levels of saving: saving levels of 7% aren't abnormal IMHO
Here is the savings ratio since the 1980s:
It looks to me like the savings levels of 2-3% (and briefly <0!) were the unusual rates.
It's interesting that the rapid drop in savings rates coincided with the shift to a much more generous welfare state to families with children. Perhaps people felt that the Government would look after all their needs in all circumstances so they didn't need to save for a rainy day.0 -
It's interesting that the rapid drop in savings rates coincided with the shift to a much more generous welfare state to families with children. Perhaps people felt that the Government would look after all their needs in all circumstances so they didn't need to save for a rainy day.
16 years of boom ( with no bust). Lulled people into a false sense of security. Spend today and pay tomorrow.
In Keynes day there wasn't credit cards.In many ways his thinking is outdated.0 -
It was one of Keynes's brighter ideas. Basically he said that in certain economic conditions, people will look to save regardless of interest rates. It was something that came out of his experiences in the 1930s which I'm not sure is precisely applicable to today. What is happening now is that people are going back to more normal levels of saving: saving levels of 7% aren't abnormal IMHO
Here is the savings ratio since the 1980s:
It looks to me like the savings levels of 2-3% (and briefly <0!) were the unusual rates.
It's interesting that the rapid drop in savings rates coincided with the shift to a much more generous welfare state to families with children. Perhaps people felt that the Government would look after all their needs in all circumstances so they didn't need to save for a rainy day.
Could it also be the fact that bigger mortgages, higher repayment levels were reducing discretionary income levels?
The 08 dip being a shock/panic reaction with short term debt repayment?"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Did your teacher then discuss the liquidity trap? Where people save regardless of rates as they are saving for reasons other than to earn interest.
Yep for things they may want to consume and aren't bothered by interest rates but would prefer to pay cash than take on debt.
The days before credit cards when short term credit wasn't easy to achieve without baring your soul.
I thought providing for yourself was good."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »Could it also be the fact that bigger mortgages, higher repayment levels were reducing discretionary income levels?
The 08 dip being a shock/panic reaction with short term debt repayment?
Possibly although it's worth remembering that interest rates fell in pretty much a straight line from 1997-2004 from over 7% to under 4%. Larger mortgages don't necessarily mean bigger payments, especially as during that time the rise of shadow banking, the internet and consumer comparison sites (this one was started in 2003) meant that the mortgage market become much more competitive.0 -
They can want it all they want. If its not in tune with what's right for china, they ain't getting it.
Don't like it? Get squished by tanks in public squares.
You pointed out on another thread that China was:-
It's capitalism, in its purest, most beautiful form.
Doesn't this go against your post above?"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
GeorgeHowell wrote: »The slump is our fault -- the consumers.
We are saving rather than spending. Saving percent of income has been around 7% for 2 or 3 years compared with around 2% prior to that.
The money is there, people don't want to go out and spend enough. By and large business now says that money to invest is there, but the market future is too uncertain.
Time for people to put their money where their mouth is, and put that 5% back into consumer spending. Stop holding back in sheep-like fashion and book the holiday, buy the new car, have the nights out, upgrade the iPhone, get a new outfit, whatever -- but spend it. If everybody did so it would make a big difference.
No good blaming everyone else when one of the major causes is US !
The fault is not the consumers. They are not obliged to perform for the benefit of the economy like some kind of circus act. People do not want to spend because they are scared, scared of losing their job, of not getting another, of paying their bills, of losing their house, of clearing their debts, or getting more taxes, or more pay cuts etc. Its a matter of confidence and the Government's behaviour (whatever its motives) is telling people to stay in their boxes and be scared.
Personally I agree with you, if we all started to spend, it would make some sense. I have not stopped spending but I am one of the lucky ones who has no reason to be scared and can afford to spend (cash). But most people are not that lucky and live with a degree of fear. They live in a nation where inequality is being encouraged, poverty has become acceptable, many groups are stigmatised, and strivers are only supported if they are well off.
Whether you believe these conditions are necessary (to combat the benefit culture etc) or vindictive (to dismantle the public sector while they have the chance) does not matter. They have created a culture of fear or of caution and that will not make people go out and spend. Only the Government can change that.Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.0 -
[QUOTE=BobQ;58898851
Whether you believe these conditions are necessary (to combat the benefit culture etc) or vindictive (to dismantle the public sector while they have the chance) does not matter. They have created a culture of fear or of caution and that will not make people go out and spend. Only the Government can change that.[/QUOTE]
Which part of the collapse of the world economy escaped you?0 -
The fault is not the consumers. They are not obliged to perform for the benefit of the economy like some kind of circus act. People do not want to spend because they are scared, scared of losing their job, of not getting another, of paying their bills, of losing their house, of clearing their debts, or getting more taxes, or more pay cuts etc. Its a matter of confidence and the Government's behaviour (whatever its motives) is telling people to stay in their boxes and be scared.
The savings rate has just gone back to 7% which is normal or even a little below the long term average. All that has happened is that things have gone to normal.
Unfortunately that mean that this:Personally I agree with you, if we all started to spend, it would make some sense. I have not stopped spending but I am one of the lucky ones who has no reason to be scared and can afford to spend (cash). But most people are not that lucky and live with a degree of fear. They live in a nation where inequality is being encouraged, poverty has become acceptable, many groups are stigmatised, and strivers are only supported if they are well off.
Whether you believe these conditions are necessary (to combat the benefit culture etc) or vindictive (to dismantle the public sector while they have the chance) does not matter. They have created a culture of fear or of caution and that will not make people go out and spend. Only the Government can change that.
analysis is all wrong.
Oh well, back to the drawing board eh?0
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