Easy ways to save money
Robert L. Bartley Editor Emeritus, The Wall Street Journal As this collection of essays is published, markets, regulators and society generally are sorting through the wreckage of the collapse in tech stocks at the turn of the millennium. All the more reason for an exhaustive look at our last "bubble," if that is what we choose to call them. We haven't had time to digest the lesson of the tech stocks and the recession that started in March 2001. After a decade, though, we're ready to understand the savings and loan "bubble" that popped in 1989, preceding the recession that started in July 1990. For more than a half-century, we can now see clearly enough, the savings and loans were an accident waiting to happen. The best insurance for financial institutions is diversification, but the savings and loans were concentrated solely in residential financing. What's more, they were in the business of borrowing short and lending long, accepting deposits that could be withdrawn quickly and making 20-year loans. They were further protected by Regulation Q, allowing them to pay a bit more for savings deposits than commercial banks were allowed to. In normal times, they could ride the yield curve, booking profits because long-term interest rates are generally higher than short-term ones. This world was recorded in Jimmy Stewart's 1946 film, It's a Wonderful Life.
The key to understanding household saving is obtaining appropriate data. Dealing with differences between rich and poor households, for example, or the old and the young, require observation of a large number of households. The focus of this study is to obtain data on many households from a number of different countries and to examine them in a coherent fashion. The hope is that through these observations we can learn about the ways policies affect savings and that other differences among savers can be controlled for, instead of being blamed on "cultural differences
The growing disparity between the developed and the developing countries has once again rekindled the debate about the relative merits of foreign investment as means whereby the developed countries can help the develÂ oping countries in both achieving a reasonable rate of growth and also from preventing the widening gap between the North and the South from widening even further. This renewed interest in the debate was most sharply highlighted at the recently concluded North-South economic summit conference at Cancun, Mexico. There, the United States took the position that massive increases in foreign aid were neither practical nor the best means of ensuring continuing and satisfactory growth in the developing countries. Rather the solution was to be found in depending on a free market economy and on inflows of private foreign investment. Behind these views, of course lie the more fundamental questions: for example, what should be the role of multinational corporations in the developing countries since they constitute the main source of foreign private investment? Should there be greater cooperation between the public sectors of the North and the South? What is the best means of bridging the economic gap between the North and the South: through direct transfers of wealth from the North to the South or through raising South's growth rates via the transfer of technology and the inflow of investment by multinationals? These questions are of fundamental importance and have wide ranging implications, not only for the economic
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