When you gotta’ spend, spend. Don’t save…

It’s budget time again for us.  Content starved news channels and half baked analysts will run riot for days together over this non-event.  Industry associations and business bodies will hold lectures and seminars to enjoy their annual few hours of fame. Few days later, there could be noise of rollbacks and the dust will settle. Man on the street will still be worse off.  Hardly does he care either.

What is certain is we’ll hear more of the `D’ word again – Deficit. It riles me no end to think we are in perennial deficit mode while our neighbor lends money to the Americans to spend and consume.  Where are we missing out? 

The Atlantic figured it out here. 

“China has a high savings rate describes the situation without explaining it. Why should the Communist Party of China countenance a policy that takes so much wealth from the world’s poor, in their own country, and gives it to the United States? To add to the mystery, why should China be content to put so many of its holdings into dollars, knowing that the dollar is virtually guaranteed to keep losing value against the RMB? And how long can its people tolerate being denied so much of their earnings, when they and their country need so much?  

The Chinese government did not explicitly set out to tighten the belt on its population while offering cheap money to American homeowners. But the fact that it does results directly from explicit choices it has made—two in particular. Both arise from crucial controls the government maintains over an economy that in many other ways has become wide open. The situation may be easiest to explain by following a U.S. dollar on its journey from a customer’s hand in America to a factory in China and back again to the T-note auction in the United States.”

When you gotta spend, spend… Don’t save !

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