ARNOLD KLING
August 14, 2011
The Top Political Contributors
August 11, 2011
Gender and the New Commanding Heights
August 11, 2011
Jamie Galbraith Makes an Assumption
August 11, 2011
Macroeconometrics: The Science of Hubris
August 10, 2011
Real and Nominal Bond Yields
BRYAN CAPLAN
August 14, 2011
The Effect of Thumb Sucking on Income
August 12, 2011
The Voice of Cold, Hard Truth to All Would-Be Educators
August 12, 2011
Ability, Morality, and Prosperity: A Paper and a Report
August 11, 2011
The Theory of Time and Frittering
August 10, 2011
Male Variance and the Remnants of the Gender Gap
DAVID HENDERSON
August 9, 2011
Hayek in "Unbroken", Part Two
August 8, 2011
Hayek in "Unbroken"
August 5, 2011
James Bovard on the Peace Corps
August 4, 2011
Summers Way Off on FDR and 1941
August 3, 2011
The "Amazon" Tax
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Raise interest rates and strengthen the dollar and we can get there. It will just take time.
Just a short while ago investment 'experts' recommended that people get 100% mortages. They expected home prices to keep rising, and by putting no money down homeowners could buy more stocks (that were supposed to keep rising, too). People went beyond that advice and bought the most expensive houses they could afford with no money down. Hence the housing bubbles (that popped) and the foreclosures (which were the major cause of our financial downturn).
Americans have short memory spans, even for big events. In three years the same spending and consumption patterns will resume. Our American culture does not include the concepts of living frugally and saving maximally.
"Raise interest rates and strengthen the dollar and we can get there. It will just take time."
How would a stronger dollar encourage exports?
I knew I made that last comment too short. I was half joking when I made it.
You are correct, a stronger dollar will increase savings but will not help exports. The way to help our exports is to quit borrowing money from our customers. Whatever we borrow from foreign investors is not available to buy our exports. Businesses find it useful to be in a position to loan customers money to help purchase what they are selling. Our policy is the opposite, we borrow money from our customers then try to sell them our products.
As far as a strong or weak dollar, it is less important for exports than most people think. The thing that helps exports is the transition from a strong to a weak dollar, but once we have reached a weaker level the benefit stops. The down side is that in weakening the dollar we are taking away value from everyone who has saved. Allowing the dollar to weaken in an attempt to help exports is the road to poverty.
It is not nessesary that people become more frugal. If the being frugal profits more then the frugal end up with more assets which results in more saving.
It is not nessesary for people to become more frugal for the saving rate to increase. If being frugal profits more, the naturally frugal will end up with more assets and more income which will result in more saving.