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

From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Wed Oct 11 2006 - 16:46:52 EDT

--- Jurriaan Bendien <adsl675281@TISCALI.NL> wrote:

> 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.
But if you go back to your statement which you have
deleted and to which I had responded, you will find
that you were puzzled by the phenomenon of rise of
both savings and indebtedness at the same time. So I
suggested that there does not seem to be anything
puzzling here. As far as savings could be larger than
investment is concerned, I think we know our 101
Keynsian macro--but this is only a disequilibrium
situation in that case too. But again it appears that
you contradict yourself in your last statement.
Cheers, ajit sinha
> Jurriaan

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