3 ms·

Think of this way. What if today, everyone decided to spend nothing and invest all their money. What will happen to the world economy? You can't make money inve

Think of this way. What if today, everyone decided to spend nothing and invest all their money. What will happen to the world economy? You can't make money investing in a business if no one is buying their product. That proves that there is a point at which savings can be harmful. Excessive savings will drive down the interest rates, and they have. Despite the fact that government borrowing is through the roof, interest rates barely hover above zero because of excessive savings. I don't mean to deny the importance of savings but be careful that you don't take demand for granted.

dantheman 17y ago
Interest rates right now are not a function of saving, they are manipulated by the federal reserve. If you look at hayek's model of the business cycle you'll know that what we have going on right now is not good; primarily because we are printing money like crazy instead of letting the dollar adjust in value as it should.
- comment176 17y ago
  The Fed can't manipulate interest rates down. They have to offer a high enough rate to sell their notes. Right now there is such over-saving that the fed can clear the sales by offering almost zero (really negative rates if you factor in inflation) interest rates. For all the talk I hear of the Fed printing at record rates, I have yet to see anyone point to a treasury auction that failed. "we are printing money like crazy instead of letting the dollar adjust in value as it should." I can read that as you advocating for a variety of different things, and so I can't tell exactly what point you are trying to make. Any way, thanks for the discussion and good luck in your engineering career.
  - dantheman 17y ago
    The fed doesn't sell treasury bonds in fact it buys them: http://online.wsj.com/article/SB123739788518173569.html http://online.wsj.com/article/SB123739788518173569.html Right now what is going on is the fed is loaning money to banks at 0%, the banks are buying treasury bonds which pay 4% and so they get free money fix their balance sheet at our expense. Every dollar the FED prints the less the money you own is worth.
    - comment176 17y ago
      Earlier you argued that people are not saving too much. However, your article says that people are in fact saving so much that the Fed is trying to turn them away. According to the article, the Fed first dissuaded savers by lowering the interest rate to zero, and when that proved ineffective they bought back the treasuries they had previously issued. I assume you have withdrawn your earlier argument. I think your point now is that the government should not have bailed out the financial sector. That's a different discussion that should have its own thread. Perhaps your point is that the Fed and the Treasury are working against each other? I don't distinguish between the two and believe Bernanke/Geithner work hand in hand, but again that's a different discussion. Also, for accuracy's sake, treasuries are not paying anything close to 4%, unless you're looking at very long term rates which are neither here nor there. You jump around a lot, which makes it difficult to see the point you are trying to make. Unless you want to revive your "society can never save too much" argument, I would like to end this discussion.

dantheman 17y ago

Interest rates right now are not a function of saving, they are manipulated by the federal reserve. If you look at hayek's model of the business cycle you'll know that what we have going on right now is not good; primarily because we are printing money like crazy instead of letting the dollar adjust in value as it should.

comment176 17y ago
The Fed can't manipulate interest rates down. They have to offer a high enough rate to sell their notes. Right now there is such over-saving that the fed can clear the sales by offering almost zero (really negative rates if you factor in inflation) interest rates. For all the talk I hear of the Fed printing at record rates, I have yet to see anyone point to a treasury auction that failed. "we are printing money like crazy instead of letting the dollar adjust in value as it should." I can read that as you advocating for a variety of different things, and so I can't tell exactly what point you are trying to make. Any way, thanks for the discussion and good luck in your engineering career.
- dantheman 17y ago
  The fed doesn't sell treasury bonds in fact it buys them: http://online.wsj.com/article/SB123739788518173569.html http://online.wsj.com/article/SB123739788518173569.html Right now what is going on is the fed is loaning money to banks at 0%, the banks are buying treasury bonds which pay 4% and so they get free money fix their balance sheet at our expense. Every dollar the FED prints the less the money you own is worth.
  - comment176 17y ago
    Earlier you argued that people are not saving too much. However, your article says that people are in fact saving so much that the Fed is trying to turn them away. According to the article, the Fed first dissuaded savers by lowering the interest rate to zero, and when that proved ineffective they bought back the treasuries they had previously issued. I assume you have withdrawn your earlier argument. I think your point now is that the government should not have bailed out the financial sector. That's a different discussion that should have its own thread. Perhaps your point is that the Fed and the Treasury are working against each other? I don't distinguish between the two and believe Bernanke/Geithner work hand in hand, but again that's a different discussion. Also, for accuracy's sake, treasuries are not paying anything close to 4%, unless you're looking at very long term rates which are neither here nor there. You jump around a lot, which makes it difficult to see the point you are trying to make. Unless you want to revive your "society can never save too much" argument, I would like to end this discussion.