[OPE-L] The growing global market for derivatives and swaps

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Wed Oct 11 2006 - 11:28:41 EDT

Ajit Sinha wrote:

But if savigs are invested, which is what classical
and neo-classical economics mostly believes, then it
sounds logical that a rise in savings would also
result in a rise in indebtedness.

I don't see how that follows. The argument about the "global savings glut"
(which some leftists criticize) is that world savings exceed world
investment (with the important exception of the USA). True, the fact that
savings can exceed investments by such a margin, is already an anomaly for
the neoclassical theory. But it does not automatically follow that a rise in
savings would lead to growing indebtedness, or explain how specifically that
would happen. As I said, the observations can be evaluated only by verifying
who owns the savings and the debts, and what form they take. Additionally,
much depends on how we define "investment".

It is obviously not true that the excess savings are simply money stored in
an old sock. Liquid deposits too chase the highest interest rates.


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