It’s all the fault of those people who work and save too much

August 17, 2009

One thing we’ve learnt from the crisis is that if something sounds funny it probably is. All that talk about slicing and dicing subprime debt to turn it into triple-A securities was hard to understand at the time and now we know it was just the 21st century equivalent of alchemy.

The current debate about the responsibility that surplus countries like China, Germany and Japan share for the crisis has a similar ring.

Plenty of people warned that the huge deficits and debts that countries like the United States, Britain and Spain ran up over the past decade were unsustainable. Recently the argument has been made that the countries that sold the Americans and Brits all those things they bought on credit share the blame.

In economic terms, it takes two to tango: if one country has a deficit, there must be a surplus somewhere else. In fact, if you run a big surplus, you are practically forcing someone else to have a deficit.

Well before the crisis broke, in March 2005, Fed Chairman Ben Bernanke discussed the “global savings glut” as an explanation for the persistent and rising U.S. current account deficit.

In recent weeks, The Economist has subjected the economies of surplus countries China, Germany and Japan (as well as that of the United States) to critical examination in a series on “rebalancing the world economy”. In its latest edition, for example, it describes the Japanese as “serial exporters”.

People in those countries need to loosen up a bit, spend more, take longer holidays (the Germans? oh the Japanese), deregulate their service sectors and stop obsessing about selling us stuff that is so cheap or of such high quality that we can’t resist it. That way they’ll help us to spend less and save more and the world will be in perfect harmony.

To be fair, the Economist acknowledges that the last attempt to get the Japanese to spend more, in the 1980s, got out of hand, creating a huge bubble whose effects Japan and the rest of the world are still recovering from.

But doesn’t this sound a little like an effort to spare American and British voters from having to make painful adjustments?

We all know from looking at our own communities and circles of acquaintances that, usually, if you live beyond your means you eventually have to pay a price, which may mean tightening your belt and doing without things for a while.

It’s hard to argue that the guy up the road who works hard, lives frugally, and never runs anything up on his credit card is somehow responsible for our plight. We can resent his smugness and pity his boring life, but blame him for our mess? Hardly.

You can imagine a village where some people work hard and others sit back and enjoy themselves. Of course, if everyone else is so poor or in debt that they can’t afford to buy anything, the honest craftsman may have trouble selling his wares. To that extent surplus and deficit countries are linked.

But the basic difference between thrift and extravagance has been understood, intuitively, for thousands of years. Aesop described it quite well in his fable of the grasshopper and the ants.


Tango REUTERS/Marcos Brindicci

Bubbles REUTERS/Claro Cortes

Grasshoppers REUTERS/Marcos Brindicci

Ants REUTERS/Juan Carlos Ulate


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“It’s all the fault of those people who work and save too much.”Can someone say this louder please? Unfortunately, I don’t think enough people can hear…or for that matter, want to hear the truth in this.thanks for bring it up.

Posted by Lily | Report as abusive

Lord help you if you live in the U.S.A. and were responsible aboutliving within your means. If you have a mortgage you can sustain,pay it on time, checked facts and never carried an huge debt burden … if you’ve always invested in energy-efficient cars, appliancesand insulated your home … if you haven’t striven to get as muchas you can in the short-term, tried to save so your kids could havea better life, tried to make sure they’re educated instead ofsimply trained, can think instead of sit like idiots in front ofsome passive entertainment … in short, if you have tried to bea responsible, civilized human being, then …You lose, bucko. The government has to save all of the self-indulgentmorons, the greedy bankers, the corrupt management, unions,and the short-sighted “investors” from feeling any pain fortheir actions. The government has to save them all with theonly actual source of *real* revenue it has: you, and your kids,and your kid’s kids to the nth will end up as slaves to pay offthe debt incurred by the federal government and the self-centeredtwits that kept voting them in.So much for America.

Posted by kementer | Report as abusive

So it wasn’t the governments and happy shoppers spending too much on credit after all? Sounds about in the world we inhabit today…

Posted by Peter H | Report as abusive

It is the weak and guilty who blame on others, is it not? Yet, truth is… looking at China, western companies have moved to here and have taught Chinese to produce and sell all that is asked for. USA has taught the world to buy and buy… on credit. The hidden side of the coin, people in this world learn fast, taking over. It is like the wealth built over generations in west is given away. West is too expensive, people not willing to work so much, then… what will west produce and have in the end???

Posted by Westerner working in Mid of Asia | Report as abusive

Of course, lets blame the other countries that were more responsible. What a stupid statement. How can you blame someone else for your own greed and ignorance? At least down here in our “3rd world” country our economic policy makers had enough foresight to see this coming. We had acts and legislature put in place more than 2 years ago to prevent ordinary people from becoming over-indebted.

Posted by Jimmy South Africa | Report as abusive

HelloHey, thousands of us who read Reuters saw this all coming years ago, and just don’t do the “consumerism” thing anyhow. We don’t do loans which “feed the beast”. We get only what we need and buy only quality stuff, fix things when they break, buy local, don’t trust State or Federal government and it’s mainstream spokespeople. We aren’t going to change for Bernanke/BushObama/Goldman Sachs/US congress and Company. We save money, live and eat simply and well, don’t watch TV, and all that unpatriotic stuff. Debt-free too. We love barter, taking care of our neighborhoods, and growing our own food. I guess we’re just lousy Americans. There are thousands of we lousy Americans and more every day.We know a hustle when we see it, and the US government, the Federal Reserve, The US senate and house, State legislatures, and big banks have been hustling the people for years, and they just don’t dare change their ways now. They have a tiger by the tail and can’t let go. When a critical mass of the American people wake up, which they are slowly doing, it’ll be something to behold. Whee-hah !!

Posted by grandpa | Report as abusive

– I have zero debt
– A high income job
– Bonus + benefits
– I’ve eliminated unnecessary expenses
– I rarely go out
– My friends and I cook and share meals
– I supplement my income from swing trading
– I make royalties from one of my own products annually
– I have no dependents
– I don’t even date

I am the machine you loath and mistakenly blame for all of your financial problems. I am he that continues to collect your money when you’re distracted and busy blaming someone or something for the world’s problems. Your irresponsibility is my profit and my gain. While you gorge on food, drink and entertainment, I am scooping up your opportunities and keeping them for myself.

These Western lifestyle habits will never change and thus my financial security is practically guaranteed.

Posted by Jonny505 | Report as abusive