Monday, December 14, 2009
"In the recent unpleasantness, the [US] made some progress towards solving its biggest economic problem of recent years: the lack of US savings. Regrettably, in the latest figures, the beginnings of economic recovery have brought backsliding with the savings rate dropping back from 6% to 4.3%. Without more savings, as global liquidity declines, the [US] will quickly become a capital-starved economy, losing investment to capital surplus countries where savings are plentiful. The difficult questions are: what caused the savings decline and what can be done about it? ... The US savings rate began to decline in the 1970s. ... There appear at first glance to be three factors that may have affected the trend in savings rates: The first and most important is the return available to savings. ... The second reason why the savings rate may have declined is the revolution in consumer finance since the 1960s. ... The third reason, impossible to quantify, is the attitude to saving of the US population itself", Martin Hutchinson at Prudent Bear, 26 October 2009, link: http://www.prudentbear.com/index.php/thebearslairview?art_id=10302.
The savings rate fell because interest rates are too low. As long as Zimbabwe Ben can steal your savings to give banks to prop them up, why save? Further, your savings are subject to taxes on non-existent interest and capital gains. Among other things the tax code should change to encourage savings. What's hard to understand? Under the current fiat-money, post-1971 regime, interest is what Uncle Sam promises to pay you to steal your principal.