
Savers are slowly choking off the life of the world economy - aburan28
https://www.theguardian.com/business/2016/dec/18/savers-slowly-choking-off-life-world-economy
======
pjc50
The headline and first few paragraphs are a disaster, because they set up
everyone to get fighty about "savers". On closer inspection:

 _It says institutional investors such as pension funds, insurance companies
and mutual funds, along with the sovereign wealth funds of oil-rich nations
and central banks, hold around $100 trillion in assets under management.

This huge sum compares to US GDP of around $18 trillion and the total market
value of US-listed companies in 2015 of $19 trillion (which today is more like
$25 trillion)._

Hyper-concentration of wealth is what's choking off the economy. An economy
where most of the returns flow to the 0.01% is unsustainable.

~~~
johnwheeler
technically, saving is saving whether you're rich or poor or whether or not
the assets are held by a custodian. the article doesn't make the distinction.

as far as wealth concentration, it certainly _is_ happening. what's scary is:
whether or not it's sustainable remains to be seen. what will society look
like if it is?

~~~
neolefty
It could be sustainable but far from optimal. How long can we live at the edge
of dysfunction?

~~~
johnwheeler
Is there anything in my comment that implies I think it would be optimal?

------
bshimmin
From the article:

 _Firstly there is the sheer scale of savings held by individuals, companies
and governments._

From
[http://www.bbc.co.uk/news/magazine-35801951](http://www.bbc.co.uk/news/magazine-35801951):

 _A survey by the Money Advice Service has found that four in 10 adults in the
UK do not have £500 or more in savings. Another by ING bank suggests 28% of UK
adults have nothing at all in the bank._

Yeah, I'm sure all those hardcore savers in the UK are ruining it for the
world's economy.

~~~
objectivistbrit
_The unprecedented size of these savings might not matter if investors only
wanted a modest return. Unfortunately investors are greedy and there are
simply not enough things to invest in that can offer the high returns they
demand.

So how do investors react? For decades, they have bullied governments to
release assets for sale that can then be leased back at high returns. In the
UK, this is why we have privatised utilities and a swath of other safe,
previously state-owned, assets in private hands._

It is not morally wrong ("greedy") for investors to seek high returns. If an
investment does offer high returns, investors will flock to it, the price will
increase, and it will quickly offer average returns, relative to the amount
invested.

Nor do investors "demand" high returns - who would they demand them from? -
they simply look for the best place to put their money. Investors are not a
cartel that lobbies the government. Government services were privatised in the
UK for political reasons.

 _Then there is the way most people, businesses and governments have
accumulated their savings. Just a quick look at the $100tn total and we can
see that most of it is the result of tax avoidance.

The Japanese are famous for their savings and investments. But middle-income
families can only save because they don’t pay enough tax for officials in
Tokyo to provide basic services. Every year the Japanese government runs a 10%
budget deficit, such that its accumulated debt is worth almost 250% of GDP._

The author has expanded the meaning of "tax avoidance" to cover cases where he
thinks the government should be imposing higher taxes. I agree that
governments should run a balanced budget (I would prefer they do so by cutting
spending), but the author implies that you could pay all the taxes you owe,
and you would still be cheating the system.

~~~
pjc50
> Investors are not a cartel that lobbies the government.

Investors _as a class_ most certainly lobby the government.

> Government services were privatised in the UK for political reasons.

.. and this politics does not exist in a vacuum. There is a whole mythology
about privatisation that is put forward by opaquely-funded think tanks. It has
other functions simply than providing assets - it's also an anti-strike
measure and a means of avoiding complaints.

~~~
objectivistbrit
Investors aren't a class. "Investors" includes pension funds, university
endowments, hedge funds, banks, sovereign wealth funds, individual savers -
the only thing these people have in common is they have funds and want to grow
them, but they differ completely on risk preference, time preference, amount
to invest, etc, etc. I.e., they all pursue their own individual self-interest,
not some collective class interest.

Some of these entities fund lobbyists and some don't.

 _mythology_ ... _opaquely-funded think tanks_

I don't know if you are a Marxist, but this is a Marxist way of looking at the
world, where each class pursues its collective interest, and funds propaganda
to spread a self-justifying mythology.

~~~
pjc50
I'm not a Marxist, but I was wondering as I typed that if the class analysis
would get pattern-matched that way.

My comment about think tanks was driven by
[http://whofundsyou.org/](http://whofundsyou.org/) , really. "Funds propaganda
to spread a self-justifying mythology" is definitely something that happens to
varying extents by various actors - that's effectively how "super-PACs" work
in the US. And privatization has the characteristics of a mythology: it's
asserted as a cure-all for problems in public services, and implemented even
when extremely unpopular. It relies on creating pseudo-markets, often with
only one buyer and tiny number of sellers, and the buyer is not the consumer
of the service so the quality gets driven down.

------
to3m
I doff my hat to the Guardian's clickbait team on this one. This is the best
I've read in ages. Is it self-parody? Is it bullshit? Does the guy believe
this nonsense? I CAN'T TELL. My slack-jawed incomprehension remained firmly in
place throughout the entire article, with only my motivation changing. A
master craftsman is at work here. <sheds single tear>

(More generally: a few years ago I saw a random comment on somebody's blog
suggesting that it was only a matter of time before savers were rebranded as
hoarders. So it's interesting to see this perhaps (finally) start to come to
pass.)

~~~
neolefty
It's not individual savers, but institutional investors that collectively hold
~$100tn, as estimated by the IMF. They're risk-averse, which leads to rent-
seeking. That's $100,000,000,000,000. I don't get to write that many zeroes
very often.

The article argues that we would all be better off if that money were spent on
the common good -- infrastructure, green tech, education, even ag &
manufacturing -- rather than being put into buying up what used to be the
public sector and putting a price on it without improving it.

Of course, how to make that happen is a _hard question_.

~~~
vkou
Unfortunately, given our current course and heading, the answer to that is as
likely to be molotovs and guillotines as it is to be something sensible.

Populism is on the rise, and the demagogues steering it aren't actually going
to fix any of the problems that created it.

------
zeahfj
This article is all kinds of wrong. It does not make an appreciable difference
between savings, investing, and speculation. There is not a glut in savings
but there is a glut in speculation. This is due to a global war on savers.
Savers are punished by artificially low interest rates, inflation of money
supply, high taxes on earned income, and subsidies to speculators (e.g.
various housing subsidies).

~~~
neolefty
> artificially low interest rates

I'm pretty sure this is market forces. Glut of savings --> low rates. Sure
there are local exceptions and regulatory impacts, but those generally can't
stand against the tide, so I'd say it's 95% natural.

> inflation of money supply

Depends on the currency, but in the case of USD, increasing the supply is
necessary to avoid deflation, which would seem superficially good for savers,
but would be disastrous for economic productivity.

> high taxes on earned income

???

> subsidies to speculators (housing subsidies)

I don't know much about this one, but I think most subsidies are homestead-y
(to owner-occupiers and first-time buyers).

~~~
zeahfj
Not market forces, see reserve bank interventions. Deflation is not disastrous
for economic productivity but it is a side effect of economic productivity.
Taxes on earned income vs capital is a regressive tax system on the working
class and a subsidy to the upper class. Owner-occupiers and first-time buyer
subsidies are subsidies to the speculators. Increase in house prices happen
the moment such policies are implemented to capture the entire benefit. The
policies are only implemented after speculators have invested and drive up
housing prices. This only benefits speculators (who can also be first-time
buyers).

~~~
neolefty
I should have read the article before replying!

Indeed, the article seems blind to capital taxes, focusing instead on income
tax. Wealth tax is a pretty alien concept in the US -- I think it would face
strong cultural resistance, and cause even more wealth flight to tax havens.
And yet, I can see how it would tackle a big part of the problems described
here.

It may need to be implemented in a coordinated global fashion to avoid
cheating. You'd need the rich nations to do it, with a working enforcement
mechanism that spans international borders. That, combined with cultural
resistance, sounds hard.

~~~
zeahfj
No need for a global system in taxes to reduce wealth disparity. Just need to
stop subsidising speculation. Due to agency costs (information asymmetry etc.)
it's harder to make large returns on large amounts so the wealth levels off.
The problem with a global system in taxes is that the taxes will just be used
to subsidise more speculation.

------
BrandonMarc
Well that's brilliant ... take a wise behavior that far too few people do, and
blame it for the world's problems.

Our rulers know that if we don't save any money, we'll be more vulnerable and
dependent ... plus, it's too hard to tax saved money, whereas it's trivial to
tax money that's moving.

~~~
zeahfj
Next thing they'll be blaming AI and robots on destroying the world economy
and not the bankers.

~~~
vkou
In an economic system which requires either gainful employment, or
humiliation, poverty, and destitution from its people, AI and robots are
indeed destroying the economy.

America produces more then it ever did, yet manufacturing is considered dead
as a source of jobs.

The small number of well-paid engineering jobs AI and robots create is dwarfed
by those losses.

~~~
zeahfj
It only destroys imagined wealth and not actual wealth (more useful stuff is
created). In the current system the new wealth creation is skewed to the
already wealthy, hence why the majority will see a decline in living standard
and the feeling of the destruction of the economy. However wealth disparities
takes money to maintain, and it is inefficient. It requires taxpayer subsidies
to be maintained. If the wealthy had to pay the unsubsidized cost of the
police, legal system, and foreign wars to protect their investments they would
stop being wealthy very quickly. So it's not AI or robots that will destroy
the economy it's high income taxes and low capital taxes.

~~~
vkou
> If the wealthy had to pay the unsubsidized cost of the police, legal system,
> and foreign wars to protect their investments they would stop being wealthy
> very quickly.

That will depend on how effectively we can replace those systems with AI and
robots. We're on our way there with the legal system.

~~~
zeahfj
In order to maintain an ever increasing wealth disparity society will have to
become more fascist and taxes more confiscatory. To prevent this you simply
need to fight fascism in all its forms (including socialism and political
correctness). This is guaranteed to happen eventually as fascist states are
inherently unstable.

~~~
vkou
Oh, we definitely need to fight political correctness.

Your god-given right to be a rude motherfucker to whomever you feel like,
whenever you feel like, without being subjected to any social censure, must be
defended. I just don't understand why we can't call a _______ a _______ in
polite company anymore.

~~~
zeahfj
As long as the methods used to uphold political correctness does not use state
or taxpayers subsidised institutions then it's ok. That's just normal society
organization with freedom of association. If you need to use the state to
enforce beliefs on others, that is where it becomes fascist.

Socialism is "fascism with a human face", the “The Fascists of the future will
be the anti-fascists.” - Winston Churchill.

~~~
vkou
Winston Churchill is also famous for gems like:

"I hate Indians. They are a beastly people with a beastly religion."

"[Ghandi] ought to be lain bound hand and foot at the gates of Delhi, and then
trampled on by an enormous elephant with the new Viceroy seated on its back."

"I do not admit for instance, that a great wrong has been done to the Red
Indians of America or the black people of Australia. I do not admit that a
wrong has been done to these people by the fact that a stronger race, a
higher-grade race, a more worldly wise race to put it that way, has come in
and taken their place."

If he wanted to find fascism, all he needed to do was look to his treatment of
the imperial holdings - something that British socialists were quite eager to
point out.

If you torture the definition of fascism so far as to include social
democracy, then it will also encompass America since the arrival of settlers,
centuries of monarchical and parliamentarian Europe...

~~~
zeahfj
The quote is one I agree with and I thought I should give its origin. I do not
agree with everything Winston Churchill has said or done, and I probably
disagree with him more than most (even of those on the left).

But perhaps some context is in order.

At that time India was pretty terrible. E.g. burning at the stake of widows
after their husbands died. Even Marx found that the British occupation was a
civilizing force. It could be argued that the occupation in its totality and
for all of it's faults was a net positive.

Obvious fascism is obvious. Which is why George Orwell's books are dedicated
to the less obvious fascisms. And it's why I made the point on political
correctness, because it's less obvious.

------
throwaway21011
It is the herd behavior of the banks. Before the Lehman Brothers bankruptcy
everyone got a credit, no questions asked.

Now, when the banks are _supposed_ to give out more credits (which is why the
interest rates are so low in the first place), the current herd behavior is to
refuse anyone but clients who don't need any credit to begin with.

I wonder if it is time that the central banks lend directly to private
individuals. Scoring and credit rating is largely done by computers anyway, at
least for the typical amounts that private individuals need.

No reason to have a middle man who does not meet his traditional obligations.

------
krona
Varoufakis calls this problem the "twin peaks paradox" in his TED talk:
[https://www.youtube.com/watch?v=GB4s5b9NL3I](https://www.youtube.com/watch?v=GB4s5b9NL3I)
(specifically 2 minutes in)

~~~
neolefty
From the video:

> One peak is the mountain of debt ... that is casting its shadow over the
> whole world ... We all recognize the mountain of debt.

> But few people recognize its twin: A mountain of idle cash, belonging to
> rich savers and corporations, too terrified to invest it into the productive
> activities that can generate the incomes from which you can extinguish the
> mountain of debt, and which can produce all those things that humanity
> desperately needs, like green energy ...

> Now, let me give you two numbers ...

~~~
pdkl95
>> Now, let me give you two numbers ...

Mark Blyth recently mentioned[1] two numbers that are particularly effective
at explaining where money is being "saved".

> In 2015, Wall St. bonuses - _not_ regular compensation, _bonuses_ \- seven
> years after they were bailed out with the public purse totaled $28.4
> billion. Total compensation paid to every single person in this country who
> earns minimum wage: $14 billion.

[1]
[https://www.youtube.com/watch?v=VWMmBG3Z4DI#t=1104](https://www.youtube.com/watch?v=VWMmBG3Z4DI#t=1104)

------
johndoez
This article is overblown, but the demographic changes in the West are heavily
impacting economic growth. It isn't so much to do with saving as to do with
the Boomers getting older. The Baby Boomers are retiring and their spending
patterns are changing. No new cars, downsizing in property, and less expense
on child rearing. At the same time there is a fertility crisis among the
young, meaning we will not see another Baby Boom anytime soon. These changes
are as big a reason for low growth as the rise of automation, debt levels, and
deleveraging.

------
X86BSD
Savers? What savers? No one is saving. Americans are drowning in debt. How
many studies have been done showing the average American is living Paycheck to
paycheck and couldn't sustain losing their job or a medical emergency? Even
those wishing to save can never ever make money chasing 0% interest or even
worse negative interest in almost all financial vehicles.

Savings? That is a complete and total joke. The average American is being
snuffed out and reduced to a wage slave.

------
SixSigma
The "savers" in the OP are not individual citizens domestic savings but money
that would be used for speculating with investment.

With record low interest rates, any project that gives an ROI worth gambling
on is worth borrowing for.

------
lawless123
I think there are some legitimate concerns in here about privatization ,large
investors and questionable practices which is being confused with ordinary
savers.

------
davecheney
What a load of scaremongering bollocks.

