tag:blogger.com,1999:blog-1469531130099587588.post4502139692129253645..comments2023-06-05T16:26:27.079+02:00Comments on Miscellaneous economic ramblings: Savings and Investment: The Singapore ExperienceThomashttp://www.blogger.com/profile/05980127611042973278noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-1469531130099587588.post-72114668291475116092009-06-09T17:58:16.886+02:002009-06-09T17:58:16.886+02:00Hi Thomas, thanks a lot for the explanation. I app...Hi Thomas, thanks a lot for the explanation. I appreciate it a lot.<br /><br />I wish there were such good blogs or even information about India on the Internet.<br /><br />Thanks again.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-9909823094314076522009-06-06T09:55:36.703+02:002009-06-06T09:55:36.703+02:00Quote: "Could China's excess savings be i...Quote: "Could China's excess savings be invested in other countries like say India?"<br /><br />In theory yes (if India runs a sufficient trade deficit). Currently, they mostly get invested in US treasury bonds.Thomashttps://www.blogger.com/profile/05980127611042973278noreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-65398232487602743782009-06-06T09:53:10.122+02:002009-06-06T09:53:10.122+02:00By definition, GDP can be decomposed as follows:
...By definition, GDP can be decomposed as follows:<br /><br />GDP = Consumption + Investment + Trade Surplus<br /><br />At the same time, it can be stated as:<br /><br />GDP = Consumption + Savings<br /><br />The income earned in an economy is either consumed today, or it is saved. <br /><br />Savings can be used either to make investments (long-lived stuff used to produce things in the future, e.g. machines or factories, or to be consumed in the future, e.g. residential houses or inventories), or they can be lent to foreigners by selling them stuff.<br /><br />If total savings in a country are bigger than investment demand, and there isn't enough foreign demand either to absorb them, then there is a demand shortfall, and the economy will be in trouble. <br /><br />This can in principle be counteracted by Keynesian-style government deficit spending (if the government spends money on consumptive stuff, consumption goes up and savings go down; if the government spends on investments, savings stay the same, but investments go up), or even by tax-financed government spending (if households have a marginal savings rate above zero, taxing their income to finance government spending increases overall demand).<br /><br />One thing that confuses lots of people is the definition of "savings" in the national accounts terminology: <br /><br />It consists of household savings + corporate savings + government savings (all three categories can be positive or negative). <br /><br />If e.g. households save a lot, but the government does lots of deficit spending, the overall savings rate of the economy can be low or even negative. <br /><br />If the corporate sector takes a bank loan to buy a machine, it's savings neutral (because the negative saving of taking a bank loan is offset by the positive saving of the value of the investment).<br /><br />If a company retains profits to buy a machine, that's positive savings, because the company doesn't use other people's savings (household savings channelled to the firm via a loan), but saves money itself (instead of distributing it to shareholdrers).Thomashttps://www.blogger.com/profile/05980127611042973278noreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-73450603920996935532009-06-06T08:40:32.088+02:002009-06-06T08:40:32.088+02:00Hi Thomas, I have been following your excellent bl...Hi Thomas, I have been following your excellent blog for sometime.<br /><br />I am not sure I understand the relationship between savings, investment and trade surplus. I researched a bit but didn't grasp it completely. Could China's excess savings be invested in other countries like say India? I am basing this on a little conversation you had with another blogger (bomlat). Thanks again for your blog.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-75492737978082627722009-06-04T19:52:48.654+02:002009-06-04T19:52:48.654+02:00Maybe Ships & Containers? Airplanes sounds pla...Maybe Ships & Containers? Airplanes sounds plausible too.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-72102007204741645182009-06-04T18:34:21.055+02:002009-06-04T18:34:21.055+02:00According to Statistics Singapore, the investment ...According to Statistics Singapore, the investment rate did rise again in 2008 compared to 2007, and most of the increase appears to be due to "transport equipment". Not sure what that means. Maybe Singapore Airlines bought lots of new planes?Thomashttps://www.blogger.com/profile/05980127611042973278noreply@blogger.comtag:blogger.com,1999:blog-1469531130099587588.post-28432521174567380742009-06-04T18:16:44.062+02:002009-06-04T18:16:44.062+02:00I think Singapore invested more in 2008, though. N...I think Singapore invested more in 2008, though. Not sure why. Maybe it's all that Integrated Resort & Casino stuff.Anonymousnoreply@blogger.com