The secret lies in the American spending, that they hardly save. In fact they use their credit cards to spend their future income. That the US spends is what makes it attractive to export to the US. So US imports more than what it exports year after year.
The Result:
The world is dependent on US consumption for its growth. By its deepening culture of consumption, the US has habituated the world to feed on US consumption. But as the US needs money to finance its consumption, the world provides the money.
It's like a shopkeeper providing the money to a customer so that the customer keeps buying from his shop. The customer will not buy; the shop won't have business, unless the shopkeeper funds him.
The US is like the lucky customer. And the world is like the helpless shopkeeper financier.
Who is America 's biggest shopkeeper financer? Japan of course.
Yet it's Japan which is regarded as weak. Modern economists complain that Japanese do not spend, so they do not Grow. To force the Japanese to spend, the Japanese government exerted itself. Reduced the savings rates, even charged the savers Even then the Japanese did not spend (habits don't change, even with taxes, do they?).
Their traditional postal savings alone is over $1.2 trillions, about three times the Indian GDP. Thus, savings, far from being the strength of Japan , has become its pain.
Hence, what is the lesson?
A nation cannot grow unless the people spend, not save. Not just spend, but borrow and spend.
Dr. Jagdish Bhagwati, the famous Indian-born economist in the US , told that don't wastefully save.
Start spending, on imported cars and, seriously, even on cosmetics! This will put all nations on a growth curve.
'Saving is sin, and spending is virtue.'
Before you follow this neo economics, get some fools to save so that you can borrow from them and spend.
This is what US has successfully done in last few decades.
Written by Dr Jagdish Bhagwati, an economist.
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