Re: A balanced view of Saving

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

In the US economy, no one saves any more voluntarily. Most savings come from pension funds into which the average worker has no choice but to contribute with company matching from his/her first day of work and not collect until some three decades later.  Pension funds like Calper, (Calipfornia Public Employee Retirement) not even a private sector fund as it is all government employees, are huge and they are the new institutional capitalists.  They own so much equity and bonds that in the case of Disney, they cannot sell their share holdings without adversely affect the price of their holdings, so they are forced to stage shareholder revolts to change ineffective management to get Disney share back up.  That is how Eisner lost support from 45% of the voting share and had to resign his chairmanship. They operate like an insurance company, spreading out their risk through the theory of large numbers by hiring fund managers wmong whom they expect 5% would lose money, 40% would break even with the SP500 and 50% will beat the SP500 and 5% would do specularly with 1000 time returns.  Every year, they fire the underperforming 5% and bring in a new crop of fund managers.  Also the actuary is such that pensioner die ans stop collecting way before the principle are consumed, so the funds get bigger and bigger, like a giant mushroom in a financial sicience fiction.  These pension funds are like a virus, feeding on workers for their own institutional obsession on growing bigger and bigger.  If we ever privatize social security, all will be slaved to these institutional tyrants.

In the new economy, even capital comes from labor; and the high return on labor's retirement funds from cross border wage arbitrage is robbing the same workers of the jobs.  As Pogo used to say: the enemy, they are us.  The new capitalism uses worker capital to exploit workers while financiers skim off huge profits without having to risk capital.  Investment bankers routinely make $20 million in annual income by "creating value" out of thin air, arranging IPOs, mergers, and structured finance deals that pension funds, known as institutions, buy into. An institutional salesman on Wall Street is one who talks pension funds into investing in deals like the one that Oragne County fell into. He is the power behind every Wall Street firm.  The salesman does not even dream up the deals which are put together by bright young graduates in math and physics with MBA's, who are paid  only $1-2 million and work 18 hour days that burn them out in a few years. That is how NY condos can sell for $10 million at $3000 per square foot.  Any none of these guys save.  They are all leveraged to the hilt out of pride, not necessity, for they all know its not how much you own, but how much you owe that counts.  Die with all the debt you can accumulate.  Only fools die with savings.

Henry C.K. Liu

Harry Veeder wrote:

Pathological saving does cause unemployment, but all saving is not
necessarily pathological. There is healthy saving and pathological saving or
hoarding.

Hoarding is motivated by the anticipation of losing monetary rewards.

Healthy saving is motivated by the anticipation of greater non-monetary
rewards. This is the proper application of the principle of delayed gratification
to economic theory.

A balanced theory of saving could eventually tells us how to achieve full
employment without inducing inflation.

Harry Veeder