Save and Invest
Jim Rogers wrote this about savings -
I find it unfortunate that so many people still believe in the zero-sum notion that profit in one area necessarily creates a loss somewhere else -- or that the haves can succeed only at the expense of the have-nots. This is simply not the case. The science of economics -- dismal as it otherwise may be -- has shown it is possible for everyone to win at the same time.
Savings and investment make this possible.
When people save by setting aside a portion of their earnings, a pool of capital is created. This money, in turn, attracts folks with ideas about how to put it to use. If the capital is held by a bank, these entrepreneurs will try to persuade the bankers to lend them some of it. If the capital is directed into the stock market, the folks with the bright business ideas will compete for it in that arena.
Over time, the business operators who have the best ideas (and can therefore offer the best returns) generally attract the most capital. In this way, the smartest and most efficient producers in each field receive the money they need to exploit their ideas, skills, and resources most effectively.
Economies that promote this type of environment -- high savings rates along with a market-driven system for putting the accumulated funds to the best use -- benefit everyone. Consumers get the best products at the best possible prices. Workers go to jobs at enterprises that are healthy and expanding. Businesses get the capital they need to put their good ideas to work.
But it all starts with savings -- the fuel an economy needs to grow. This is why, in addition to examining a nation's economic climate (capital gets distributed efficiently only if markets are free), I advise global investors to take a close look at a nation's savings rate.
Just as economic performance can vary widely from country to country, so can savings rates. According to the Organization for Economic Cooperation and Development in Washington, D.C., Japan's gross savings rate in 1995, measured as a percentage of disposable household income, was 13.4 percent. Germany's savings rate was 11.6 percent, and France's was 14.3 percent. In contrast, the savings rate in the U.S. was equal to only 4.7 percent of disposable household income (down from 9 percent in 1982). Canada's rate was 7.4 percent, and Finland's was 5 percent.
Jim Rogers wrote in another article -
Some of the world's greatest success stories have gotten that way because of how much their inhabitants saved and invested. In China, the savings rate is about 30%. The tiny island nation of Singapore was a backwater swamp 40 years ago. Its citizens have been forced to save roughly 40% of their income by having it deducted from their salaries. The savings were, in effect, put into individual accounts and were eventually made available to the depositor at age 55. (This is a marked difference from our Social Security system, which is a Ponzi scheme taking from today's workers to pay today's retirees.) While I don't condone forcing people to save, Singapore has certainly emerged as one of the great success stories of the past 35 years. They have conclusively demonstrated the approach of favoring saving and investment over encouraging consumption.
I find it unfortunate that so many people still believe in the zero-sum notion that profit in one area necessarily creates a loss somewhere else -- or that the haves can succeed only at the expense of the have-nots. This is simply not the case. The science of economics -- dismal as it otherwise may be -- has shown it is possible for everyone to win at the same time.
Savings and investment make this possible.
When people save by setting aside a portion of their earnings, a pool of capital is created. This money, in turn, attracts folks with ideas about how to put it to use. If the capital is held by a bank, these entrepreneurs will try to persuade the bankers to lend them some of it. If the capital is directed into the stock market, the folks with the bright business ideas will compete for it in that arena.
Over time, the business operators who have the best ideas (and can therefore offer the best returns) generally attract the most capital. In this way, the smartest and most efficient producers in each field receive the money they need to exploit their ideas, skills, and resources most effectively.
Economies that promote this type of environment -- high savings rates along with a market-driven system for putting the accumulated funds to the best use -- benefit everyone. Consumers get the best products at the best possible prices. Workers go to jobs at enterprises that are healthy and expanding. Businesses get the capital they need to put their good ideas to work.
But it all starts with savings -- the fuel an economy needs to grow. This is why, in addition to examining a nation's economic climate (capital gets distributed efficiently only if markets are free), I advise global investors to take a close look at a nation's savings rate.
Just as economic performance can vary widely from country to country, so can savings rates. According to the Organization for Economic Cooperation and Development in Washington, D.C., Japan's gross savings rate in 1995, measured as a percentage of disposable household income, was 13.4 percent. Germany's savings rate was 11.6 percent, and France's was 14.3 percent. In contrast, the savings rate in the U.S. was equal to only 4.7 percent of disposable household income (down from 9 percent in 1982). Canada's rate was 7.4 percent, and Finland's was 5 percent.
Jim Rogers wrote in another article -
Some of the world's greatest success stories have gotten that way because of how much their inhabitants saved and invested. In China, the savings rate is about 30%. The tiny island nation of Singapore was a backwater swamp 40 years ago. Its citizens have been forced to save roughly 40% of their income by having it deducted from their salaries. The savings were, in effect, put into individual accounts and were eventually made available to the depositor at age 55. (This is a marked difference from our Social Security system, which is a Ponzi scheme taking from today's workers to pay today's retirees.) While I don't condone forcing people to save, Singapore has certainly emerged as one of the great success stories of the past 35 years. They have conclusively demonstrated the approach of favoring saving and investment over encouraging consumption.
