Something good is coming out of the covid lockdowns. Economist David Rosenberg released a special report via the eponymous Rosenberg Research, concluding “the pre-COVID-19 ‘norm’ of a 7% personal savings rate will morph into a post-COVID-19 norm of 10%.” Rosenberg makes frequent TV appearances after he was chief North American economist at Merrill Lynch in New York from 2002 to 2009, when he was consistently included in the Institutional Investor All-Star analyst rankings. From there he spent ten years as chief economist and strategist at Gluskin Sheff. Rosenberg doesn’t portray his prediction of a savings rate increase necessarily as a positive, instead writing, “for the 70% of aggregate demand called ‘the consumer,’ this will exert an everlasting drag on the
Topics:
Doug French considers the following as important: 6b) Mises.org, Featured, newsletter
This could be interesting, too:
Guillermo Alcala writes USD/CHF slides to test 0.8645 support with US inflation data on tap
Swissinfo writes Swiss central bank posts CHF62.5bn profit
Nachrichten Ticker - www.finanzen.ch writes Trump-Faktor und Marktbedingungen könnten für neuen Bitcoin-Rekord sorgen
Charles Hugh Smith writes Is Social Media Actually “Media,” Or Is It Something Else?
Something good is coming out of the covid lockdowns. Economist David Rosenberg released a special report via the eponymous Rosenberg Research, concluding “the pre-COVID-19 ‘norm’ of a 7% personal savings rate will morph into a post-COVID-19 norm of 10%.”
Rosenberg makes frequent TV appearances after he was chief North American economist at Merrill Lynch in New York from 2002 to 2009, when he was consistently included in the Institutional Investor All-Star analyst rankings. From there he spent ten years as chief economist and strategist at Gluskin Sheff.
Rosenberg doesn’t portray his prediction of a savings rate increase necessarily as a positive, instead writing, “for the 70% of aggregate demand called ‘the consumer,’ this will exert an everlasting drag on the pace of economic activity.” But, he quickly follows with, “Then again, it will also mean a deeper pool of savings for productive investment.”
Rosenberg’s first line sounds like John Maynard Keynes’s “paradox of thrift” theory, which claims that personal savings are a net drag on the economy during a recession. The second line sounds more like Ludwig von Mises, who wrote, “Capital is not a free gift of God or of nature. It is the outcome of a provident restriction of consumption on the part of man. It is created and increased by saving and maintained by the abstention from dissaving.”
Rosenberg makes a point that has been lost during this whole pandemic-turned-recession episode,
I mean, seriously, over half of American households did not have enough cash on hand to even get through three months of a job loss—quite remarkable when you consider we went into this mess with a 50-year low unemployment rate of 3.5%. Not to mention the corporate sector where, for some reason, the word “liquidity” became a dirty nine-letter word this past cycle.
Once there was a time when personal finance experts would say a household should have at least six months’ worth of liquid assets on hand just in case. The same advice applied to those starting a business. But, everyone and every business has operated like the government does, borrowing not just for stuff, but for day-to-day expenses. Thus, due to covid, everyone from unemployed waitresses to United Airlines is rattling their tin cups for a handout. And Uncle Sam is, albeit slowly, responding. This papering over of the crisis may stymie Rosenberg’s prediction. Let’s hope not. As Murray Rothbard explained in Man, Economy, and State,
All saving is directed toward enjoying more consumption in the future; otherwise, there would be no point at all to saving. Saving is abstaining from possible present consumption in return for the expectation of increased consumption at some time in the future. No one wants capital goods for their own sake. They are only the embodiment of increased consumption in the future.
In closing, Rosenberg views the savings issue through Keynesian glasses, writing,
And this got me thinking about how the future will be one of treating “savings“ as sacrosanct. Beyond a quarter or two of pent-up demand released in 2021, frugality is going to emerge as the primary theme. It is not the end of the world, either, unless you’re an advocate for a sustainable and vigorous economic expansion.
Mises saw it differently, writing in Human Action,
At the outset of every step forward on the road to a more plentiful existence is saving—the provisionment of products that makes it possible to prolong the average period of time elapsing between the beginning of the production process and its turning out of a product ready for use and consumption….Without saving and capital accumulation there could not be any striving toward nonmaterial ends.
Frugality first, then prosperity.
You Might Also Like
How Central Banks Destroy Money’s Purchasing Power
2020-07-20
Without a monopolist central bank, market forces would restrain the issuance of bank notes. But once central banks monopolize money creation, wealth is systematically transferred to the central bank and the privileged few who are favored by the state.
There Are No Winners in the US-China “Tech War”
2020-07-29
After unleashing a disruptive trade conflict with China, the Trump administration has also escalated the lingering “cold tech war” between the two rival powers. Over the last two years, the US has passed new rules limiting China’s investments in the US, restricting bilateral information and communications technology (ICT) trade and controlling exports of sensitive and emerging technology to China.
Political Self-Determination and the Nagorno-Karabakh Conflict
2020-08-05
The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with.
The Global Jobless Recovery
2020-08-25
The United States added 1.76 million Jobs in July 2020, compared to a consensus estimate of 1.48 million. Unemployment fell to 10.2 percent versus the 10.6 percent expected.
Why Economics Cannot Be Understood through Experimentation
2020-09-04
In the natural sciences, a laboratory experiment can isolate various elements and their movements. There is no equivalent in the discipline of economics. The employment of econometrics and econometric model building is an attempt to create a laboratory where controlled experiments can be conducted.
On Foreign Policy, Trump Is Still the Lesser Evil
2020-10-27
The Democrats, Liz Cheney, and the Never Trumpers still want endless wars, and they hate Trump’s apparent lack of enthusiasm for embracing their dreams of empire.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "On Foreign Policy, Trump Is Still the Lesser Evil".
James Mill: Laissez-Faire’s Lenin
2020-11-16
[An Austrian Perspective on the History of Economic Thought (1995)]
James Mill (1771–1836) was surely one of the most fascinating figures in the history of economic thought. And yet he is among the most neglected. Mill was perhaps one of the first persons in modern times who might be considered a true "cadre man," someone who in the Leninist movement of the next century would have been hailed as a "real Bolshevik." Indeed, he was the Lenin of the radicals, creating and forging philosophical radical theory and the entire philosophical radical movement.
A brilliant and creative but an insistently Number 2 man, Mill began as a Lenin seeking his Marx. In fact, he simultaneously found two "Marxes," Jeremy Bentham and David Ricardo. He met both at about the same time, at the age of 35, Bentham
China’s New Five-Year Plan Exposes the Wishful Thinking behind Socialist Regimes
2020-11-23
On October 29, the nineteenth Central Committee of the Chinese Communist Party concluded its fifth plenum, a four-day meeting devoted primarily to laying the groundwork for China’s fourteenth five-year plan, which covers the period from 2021 to 2025.
Tags: Featured,newsletter