thrift and thriving
Something to consider, especially on the busiest shopping day of the year (ironic given yesterday's focus on gratitude)...
Excerpts from two essays on David Blankenhorn's latest book, Thrift: A Cyclopedia...
First, from Marvin Olasky in World...
We usually don't think of "thrifty" as a controversial adjective, but a glance at the first five synonyms—frugal, miserly, parsimonious, provident, prudent—offered by thesaurus.com quickly shows the debate: The first is neutral, the next two negative, the last two positive....
David Blankenhorn's Thrift: A Cyclopedia (Templeton Foundation Press, 2008) provides a thoughtful, entertaining, and pro-thrift look at a surprisingly controversial concept....what's the fuss? Well, listen to this Great Depression radio address by John Maynard Keynes: "There are today many well-wishers of their country who believe that the most useful thing which they and their neighbors can do to mend the situation is to save more than usual. . . . [That] is utterly harmful and misguided—the very opposite of truth."
Keynes wrote his famed Treatise on Money for economists in 1930 and hit the airwaves in 1931: "Whenever you save five shillings, you put a man out of work for a day. . . . Whenever you buy goods you increase employment . . . this is only the plainest common sense. For if you buy goods, someone will have to make them. And if you do not buy goods, the shops will not clear their stocks, they will not give repeat orders, and someone will be thrown out of work."
A basic confusion perpetuated by Keynes. He forgot the opportunity costs of money saved in the economy, assuming that only consumption generates economic activity-- a bizarre and somehow captivating assumption.
Olasky also describes the book as "Somewhat like Bill Bennett's The Book of Virtues, this look at one virtue contains short readings with pithy quotations and charming anecdotes..."
The word is thrift and it is derived from thriving, and not so long ago a lot of people understood the connection between the two....The timing [for the book] could not be better, or worse, what with all these stories about unthrifty people driving themselves into penury...Thrift, he believes, is the answer to “growing economic inequality, to independence-killing indebtedness, to runaway mindless consumerism,” among other ills afflicting us. Blankenhorn says, “I want to testify about it. I want to shout it from the rooftops. I want to convert people. And I hope that after you read this book, you will want to do the same.” Such a born-again experience is not guaranteed, but I expect a good many readers will be both wiser and happier for having taken to heart the message of Thrift: A Cyclopedia.
posted by Eric Schansberg @ 10:57 AM
5 Comments
5 Comments:
When I studied Econ in college I always thought Keynes was a quack. It never made sense to my naive mind. Everything was about consumption and nothing about savings.
Peter Schiff uses an anaology in his book "Crash Proof" that goes something like this. 5 Asians and 1 American are on an island, and in this fictitious island economy the first Asian is responsible for fishing, the second hunting, the third preparing the food, the fourth cooking the food and the fifth serving the food and entertaining. The Americans job is to eat the food. How long before the Asians decide the American consumer has worn out his welcome.
How long before the the savers and creditors of the world honor the IOU's of the US debtors and consumers?
Keynes held sway in economics for 40 years and still holds tremendous sway in politics (at least implicitly). The problem is that the Keynesian approach also connects to the perverse incentives in political economy-- to use govt to pursue short-term obvious benefits at the expense of long-run and otherwise subtle costs.
The Schiff analogy fails (badly) in that, in real life, the American offers something in return. It's mutually beneficial trade.
Sometimes, it's widgets for foods. Other times, it's an investment for food-- whether govt debt or part of a corporation. As long as the investments are attractive enough-- in terms of risk and rate-of-return-- a lot of people will make that choice. After all, they have to put their retirement funds into something: why not "buy American"?
What if the American borrows the widget from the Asians? It's not his own asset to invest.
Aren't we now borrowing money from China (printing it out of thin air- fiat money- with no possibility to tax or cut spending ENOUGH to pay back the monies we are spending or already owe the world) to keep our economy rolling so we can turn around and buy goods from China?
I could understand the arrangement if we spent our own dollars to buy their goods. What happens when we borrow money from them that can't be paid back to buy their goods? How long do the saver economies of the world want to hold onto our IOU's. They have a vested interest in the dollar so they can't exactly dump them, but they can take them and use them to buy all our assets. Get out your wheelbarrows and fill them up with dollars. Can you say hyperinflation?
How does this w
Do you mean: What if the American borrows the money to pay for the widget from the Asians?
Same idea. Why did someone loan the American the money in the first place? Perceived risk and rate-of-return.
Some of the money China invests in us is for govt bonds and other is within the private sector. Presumably, they'll continue to invest as long as R&R are the best they can do. If they want to sell, they'll have to find a buyer-- who will then hold the debt/investment.
At some point, they may believe that the investment is not worth it-- China with us &/or whoever loaned the American money to buy a widget.
In the case of US Treasuries- they would be getting a near negative yield.
I am really starting to understand Ron Paul's attacks on the fiat money system as opposed to Austrian sound money economics- as he calls it. To me the government socialism of banking and soon to be the auto industry- maybe even big retail and healthcare- means they have reached the point where the only way to preserve the system is to keep the confidence, especially in the dollar. There are some very wise/wealthy individuals and countries moving large portions of assets into gold, silver and commodities. http://www.campaignforliberty.com/blog.php?view=4910
Iran moving reserves to gold.
http://tiny.cc/R71CT
Peter Schiff exonerated on his philosophy and explaining this thoughts going forward.
http://www.campaignforliberty.com/blog.php?view=4844
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