From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Wed Oct 11 2006 - 11:28:41 EDT
Ajit Sinha wrote: But if savigs are invested, which is what classical and neo-classical economics mostly believes, then it sounds logical that a rise in savings would also result in a rise in indebtedness. I don't see how that follows. The argument about the "global savings glut" (which some leftists criticize) is that world savings exceed world investment (with the important exception of the USA). True, the fact that savings can exceed investments by such a margin, is already an anomaly for the neoclassical theory. But it does not automatically follow that a rise in savings would lead to growing indebtedness, or explain how specifically that would happen. As I said, the observations can be evaluated only by verifying who owns the savings and the debts, and what form they take. Additionally, much depends on how we define "investment". It is obviously not true that the excess savings are simply money stored in an old sock. Liquid deposits too chase the highest interest rates. Jurriaan
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