Monday, February 11, 2013

Why Start Depleting Private Savings Again So Soon?

commentary by Roger Erickson

Largely because the 1% in any or all countries start fearing that the unit buying power of their hoarded fiat may depreciate? That's so stupid, to forego return-on-coordination, a dynamic value, in order to hoard a static value of far less intrinsic adaptive value.

Back to the analogy of kids taking their toys and going home? Instead of letting everyone use them to develop and leverage team skills?

Houston, we have a fundamental misuse of innate hoarding behavior - and resulting maldistribution of static assets.  We're letting the merchants rule our culture, instead of serving it.*

Surge in Chinese credit raises fears

"All else equal, a reduction of state sponsored lending gets ‘replaced’ by non govt lending to the extent it can be sustained by incomes, collateral values, etc.

And not to forget, likewise, the private sector is necessarily pro cyclical.
The western educated kids at the name mainstream schools may not have brought that home with them…"


...

* "[Their] rage passes description - the sort of rage that is only seen when rich folk that have more than they can enjoy suddenly lose something that they have long had but have never before used or wanted."  JRR Tolkien

8 comments:

Matt Franko said...

Roger,

Do any species exhibit group behavior where they end up saving all the time and it doesn't cause a problem?

Rsp

Roger Erickson said...

"Do any species exhibit group behavior where they end up saving all the time and it doesn't cause a problem?"

Saving all the time? Sure, three categories come to mind.
Hibernation.
Spores/seeds/viruses/parasites.
Extinct species.

Define "all the time" and "problem." Problem for whom, how soon?

Matt Franko said...

Continuous savings... Do any species continuously save? Bees? Do bees continuously save honey?

Problems such as a sudden collapse in the population due to the savings?

Many people today think too much savings would create a problem, this leads to NAIRU, etc... They think people have to stay poor, etc....

So I'm thinking that nature would probably prove these people wrong....

Rsp

Tom Hickey said...

Animals have no money, of course, so they can't save in the financial sense. But they do store energy for future use, both within the body, e.g., as fat, and outside the body, e.g., bees and honey, squirrels and nuts, etc. One could consider this to be "real saving" in contrast to financial. Human do this, too, but they also save financially.

Interestingly, although animals do not use money they do employ proto-credit in the sense of reciprocity and mutual obligation. Since money is credit, the foundation of money can been seen as pre-human. Humans just took it to a higher level of abstraction.

Matt Franko said...

Tom,

What I'm trying to get at is this fear of savings all of a sudden causing price instability....

Like all of a sudden, people are going to spontaneously start blowing all of their savings and allegedly causing problems.... I don't believe it...

I'm figuring nature tells a different story...

Rsp

Tom Hickey said...

I think that it's pretty simple. Saving defers consumption, and dissaving draws income forward. If income in insufficient in the period to meet current liabilities, then the liquidity has to become from either drawing down savings or borrowing. It's a simple cash flow issue.

I am assuming that people are drawing down savings due to current liabilities rather than to meet discretionary expenses, since ordinarily people don't do that.

Here we see people suddenly drawing down retirement funds instead of cutting back on spending, or borrowing. That indications to me that the drawing down of savings is in response to a cash flow crunch arising from maintenance expense. This behavior is consistent with a lengthy contraction like this one.

Roger Erickson said...

Matt says: "I'm figuring nature tells a different story..."

We're exploring unprecedented degrees of freedom, Matt, so the rest of nature doesn't necessarily guarantee any answers.

Have other eusocial species achieved the sort of excess savings that human cultures routinely do? Sure.

What do they typically do with their excess savings? The answer is: "Spawn yet more colonies."

Geographically, there's no place for current Vikings to easily emigrate to. Israel's been the last affinity group to try ethnic cleansing .. and it's not clear they'll survive the building backlash.

Back to the rest of us. Given there's no geographic space to migrate to, the rest of nature seems to suggest that some of us will find a way to migrate into other option dimensions?

What's the widest extremes of options our youngest citizens are exploring? Bitcoin? Bitculture? Bitnationality?

No easy or easily visible answers, but that doesn't mean we're not exploring them by default.

Tom Hickey said...

Given there's no geographic space to migrate to

Given the consequences of climate change there is going to be less space to migrate to. Trend will be to urbanization.