Low US Savings: Is It a Problem?

One of the concerns of enlightened elite opinion recently has been a worry over the lagging US savings
rate. Compared against any nation you like, the US savings rate comes in at the bottom. But like
the balance of payments problem, another worry of concerned elitists, the question is: Is “the problem” a problem?

The balance of payments is always in balance, wrote Ludwig von Mises half a century ago. He meant
that if the US runs a balance of payments deficit in, say, merchandise, it merely reflected the
choice of millions of consumers and thousands of producers. It means that Americans want to buy goods, and foreigners want
to hold American paper: dollars, debt, and equity.

In NRO, John Tamny weighs into The Wall Street Journal’s
David Wessel for worrying about
the savings deficit, that we need to wean ourselves from “from growing dependence on the savings of Asians and Europeans,”
and that the US “consumes more than it makes.”

The problem with this received elite opinion is that is flies in the face of some awkward facts. If
we are dangerously dependent on foreign capital, why are interest rates so low? And if low savings
is such a problem, why does US national wealth keep going up?

The answer is that the US does not have to save because our economy generates wealth.

[Data] last month from the Federal Reserve show that U.S. household net worth hit a
record of $49.8 trillion, up roughly $5 trillion in the last year alone. Notably, those gains
were split
almost equally between residential real estate and financial assets.

High savings rate is an indication that the economy is not throwing off the increase in wealth that
people need to provide for the future.

the best way to boost the savings rate would be for both the housing and stock
markets to collapse. Americans experienced just such a thing in the early 1980s when stocks
were still mired in a multi-year slump and home prices were crashing. Amidst those capital
losses, the savings rate unsurprisingly reached double digits.

To put it bluntly, Americans save when the economy is in the tank.

The bigger question is: Why do foreigners want to put their money into American debt with its
low returns? Why aren’t there better risk-reward propositions out there?

Who Lost Delphi?

On October 8, 2005,
Delphi, the auto parts supplier, became
the largest US manufacturer to file Chapter 11 bankruptcy proceedings. Delphi is
the parts division
that General Motors spun off a few years ago.

The bankruptcy of Delphi will have serious consequences even if it survives. It will no doubt eliminate
shareholders’ equity. It will severely cut workers’ wages and benefits. It will likely throw the
company’s pension plan into the hands of the federal pension insurance system, resulting in
major cuts in retiree pensions.

And, of course, there is the potential for a disruption in parts supplies to U.S. automakers.

Delphi is under criticism for awarding bonuses to its top executives before announcing bankruptcy. But
CEO Steve Miller defends his actions saying

it was the only way to keep talented management needed to complete the restructuring.

"We pay hourly workers three times the market rate; salaried staff are paid
a market rate and execs are paid below market," said Mr Miller.

So who lost Delphi? Was it greedy management asleep at the switch? Was it greedy unions that
negotiated unsustainable wages and benefits by using their muscle power to intimidate the auto manufacturers?
Is it the fault of foreign automakers competing with slave or sweated labor? Is it the fault of
Congress that has given the labor unions monopoly powers that would never have been given to a corporation?
Is it the fault of labor activists that have polished the image of labor unions over the years?
Is it the fault of workers who insisted that their union leaders negotiate for wages and benefits
that could never be sustained over the long term?

Or is it just the way of the world? Corporations are born, they grow and prosper, spinning out products
to consumers and income to stakeholders. And then they grow old and die.

So which is it?

The New Tory Prince

As the song goes, “I been down so long that down don’t worry me.” That
is what the British Conservative Party has been singing after three successive
defeats at the polls. But in last week’s party conference a new star was born singing a new
song: David Cameron,
who electrified the Tory Party with the best speech of the week.

In this opinion article in The Daily Telegraph
Cameron
attempts to advance his campaign to be party leader in Parliament, and hopefully Prime Minister at
the next general election.

Happy Columbus Day

How should we celebrate Columbus Day? As a celebration of western European values and expansion?
Or as a shameful conquest of noble savages that lived in harmony with nature?

Edward Hudgins celebrates the ordinary people that came out from Europe to America.
It may have been that the stout Cortez and his ilk enslaved the Meso and South Americans. But
in North America, the conquerors were workers who came to carve a new life out of the wilderness.

They had to clear the land, plant and sow crops. They had to practice
the trades of carpenters, masons, loggers, miners, blacksmiths and tailors to build
their towns and to create the necessities for life and prosperity. In the centuries that
followed, their descendants -- including Americans today -- built the richest, most prosperous
country on Earth.

Instapundit, on the other hand celebrates the change that Columbus’s discoveries
had on the Europeans back in Europe. Quoting Samual Eliot Morison:

"A new envisagement of the world has begun, and men are no longer sighing after
the imaginary golden age that lay in the distant past, but speculating
as to the golden age that might possibly lie in the oncoming future."

In all this celebration though, we should remember those swept away in the triumphant European
expansion as its adventurers spread out across the oceans
and the continents of the world, trading, dominating, killing,
and ruling. The victims. It ain’t fun when your world gets turned upside down by strangers that
suddenly appear over the horizon.

We like to present history as a triumphant narrative of progress from darkness to light, from
simplicity to sophistication, from cruelty to compassion. Others like to present it as a
death spiral of evil and despair.

But the big question is: What does it all mean?

The President Plants a Stake in Iraq

In his speech on Iraq on October 6, 2005,
President Bush
clarified, finally, the war aims of the
United States in the global war on terror. It is to oppose and neutralize the forces that
“call for terrorist murder against Christians and Jews and Hindus -- and also against Muslims from other traditions, who they regard as heretics.”

But how? That was the meat of the president’s speech. What he called the fifth element of his
strategy is in fact the centerpiece of his strategy, which the other elements support:

to deny the militants future recruits by replacing hatred
and resentment with democracy and hope across the broader Middle East

We can understand this better by turning to political philosopher Bertrand de Jouvenel.
For him, the point of a successful politics is to create a mild and friendly politics of civility in place of
the alternative, a ruthless and murderous politics of hate. Every faction is “some part of a people... joined together in a bellicose spirit against
some other part.” The intent of leaders of sects and factions is to set citizens at war with each other. The goal of
friendly politics is to set citizens to work with each other.

The point of modern democracy is to reduce revolutionary combat and assassination with symbolic combat,
and replace battle with friendly rivalry.

Maybe that is why President Bush is avoiding a knock-down drag-out fight over his Supreme Court nominations.
Maybe he wants the culture wars of the last decade to cool off a bit—lest they escalate into real war.

Ronnie Barker R.I.P.

They don’t make them like that any more, certainly not like
Ronnie Barker, the British
TV comedian and writer who died October 3, 2005, aged 76.

American public TV viewers will remember Barker as the fat half of The Two Ronnies,
a show characterized by wordplay, stock British caricatures, and the “honest vulgarity” of
double-entendres. He
also exceled as the crafty imprisoned career criminal Fletcher in Porridge, and the corner
shopkeeper in Open All Hours:

Arkwright, the waddling, stammering
Yorkshire shopkeeper who divided his time between satisfying his roaring avarice and
attempting to control his lust for the district nurse, Gladys.

Barker was a modest man who began as a bank clerk and looked like one, but who slowly created a
career for himself in the theater the hard way by climbing up through regional repertory until he
caught the eye of rising stars like Peter Hall and David Frost.

Then, in 1988, in his late fifties, he gave it all up.

On New Year’s Day 1988 Barker retired to his converted
watermill in Oxfordshire, devoting his energies to ordering his collection of 70,000
Edwardian and Victorian picture postcards (some of the saucier ones were published in
anthologies such as his Book of Bathing Beauties), and to running his antique shop,
The Emporium, in Chipping Norton High Street.

After all, somebody has to do it.

August Wilson R.I.P.

In an era in which American theater has driven theatergoers to despair as it
panders to
elite fashions about race, class, and sexual orientation, there
is at least August Wilson. But not any more. The African American playwright who died October 2, 2005 aged 60.

The question about any lionized African American in the United States
at the turn of the twenty-first century is: Was he any good, or was he just
another average performer boosted into celebrity by fawning liberals? It’s
a pity, but that’s the reality.

Having seen Ma Rainey’s Black Bottom and Jitney I’d say that the
answer is a definite Yes. Wilson did not serve up received liberal notions
about race, but human drama about real people.

So in Ma Rainey we may see condescension from the white recording studio
execs, but we also see them cowering and accommodating the prima-donna rages
of the impossible singer Ma Rainey. And we see the destructive rage of the strutting
black trumpeter.

In Jitney we see an African American father and son battle it out. The son gets sent
up to jail for murdering a white man, father of the white girl he’s been seeing, and
returns twenty years later seething with rage. Meanwhile his father has learned to live
under law. So when the city wants to raze the shopfront and redevelop the shopfront
he’s using he sends for a lawyer to deal with his conflicts instead of reaching
for his gun. And he’s become a respectable member of the community, a deacon
at his church. How do we deal with power, Wilson asks. With a lawyer or with a gun?

You can find lots of obituaries. Here’s one by
Joe Adcock.
There’s a better one at The Daily Telegraph.