Talking Krugman : The Global Economy
…surplus countries such as China, with low debt and investment and high savings, and deficit countries, which have low savings and housing bubbles.
“All around the world there is a division of surplus countries with high savings, relatively low household debt, trade surpluses and unfortunately low investment,” he said, adding that those countries export capital “to countries with high deficits, low household savings and high debts and housing bubbles.”
Pointing to the United States as an example of the latter category, Krugman called this an unsustainable outlook for the future.
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Prof Krugman is pointing to the Asian countries the earlier category. Traditionally, Asian countries household saving high, and low spending – frugality is one of the cherished virtue of Confucius teaching – most far eastern counties are influenced deeply by this teaching. Through this saving people investing and lending to business can be expansion and entrepreneurs can borrow started up their enterprises, etc… demand and supply, investing on innovation technology, the Solow Growth Model exemplary explained this recent Asian economy growth. Most Asian countries, except, Japan very young minuscule social welfare system or none existent and shaky political system. By contrary, USA and western culture traditionally low saving high spending with better established social welfare system and mostly well established democratic political system.
So the below Jim Rogers’s answer to the panel question;
“Well, capital has already been flowing into Asian economies, as you can see by the fact that they’re the world’s biggest creditors.”
Was wrong because, the household saving was the backbone of the Asian economies, it was not the western capital, and I am not sure what he mean by ‘ the world’s biggest creditors”. As still Asian economies heavily depend on their export to Western countries, especially USA.
As the below is nicely sums up what is this mean as:
Q: What should Korea do to minimize the effect of the global financial crisis in the future?
A: Korea’s flowing exchange rate and independent monetary policy “need a framework
[because] there’s only some insulation you can get.” Korea does benefit from the world inventory balance. However, based on what we have learned, macroeconomic dependence is strong. For Korea, “the best thing to do is talk sense to the bigger members of the G20.”
I believed that a “credibility" mean in a person or a country, not only how much saving in your bank accounts but also characteristic of the person as well. As we don’t felling in love with people only their purse size!!
After re-reading update: Well acutely in the panel Roger didn’t say a such above sentence and I made the statement the above by not reading the panel discussion.
Here is the Art of War, Sun Tzu said:
The art of war is of vital importance to the State.
It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected.
Gosh what a sharp sword tongue work!
ANOTHER UPDATE: This is my answer, the above Roger comment is wrong because “The Asian countries (mostly) are creditor countries, not debtor countries. Money is flowing out from China into the rest of the world, not the other way.” (I asked the Geek Alan for this he helped me this answer).
