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Dear Sir,

Martin Wolf ("Asia's Revenge", 9 October) brings up again the "savings glut" theory to try to partly exonerate Western financiers from their follies. While Asia's mercantilist policies, and their very real desire to no longer have capital account deficits are very real, their savings "glut" has been fully created by policies in the West. Central Banks, led by Alan Greenspan's Fed, maintained absurdly low interest rates despite massive evidence of asset bubbles; in fact, these bubbles were a desired result, as they allowed for massive profits by the financial sector, and made it possible to hide from the general population the stagnation of their incomes caused by other parallel policies such as labor market deregulation. Fundamentally, people in the West lived above their means. Together, these policies created an appearance of prosperity for all (GDP was up, on the back of strong income growth at the top) while effectively organising a vast transfer of wealth from the many to the few. The Asians were happy to tag along, as it allowed them to develop their infrastructure and economies, but it is unfair to blame them for the fact that the much touted prosperity of the past years in the West was essentially fake.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Oct 9th, 2008 at 06:25:14 AM EST
Very good.

As an alternative opening, how about:

The "savings glut" theory which Martin Wolf resurrects (...) fails to address the root cause of the financial crisis: the reckless dereliction of central bankers and financial leaders in the performance of their duties.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Thu Oct 9th, 2008 at 07:05:36 AM EST
[ Parent ]
I'm with you dvx.

I think it's hard to make the case that the saving glut has been created by the policies of the West. (hard does not mean impossible, but we'd be talking about a chain event. It's not the immediate consequence by any mean).

On the other hand, that it fails to address the root cause is clear enough. You would have had a bubble, Asia or no Asia, with those negative real interest rates for so long, coupled with next to no taxation on the proceeds of capital.

"The womb that spawned that thing is fertile yet"

by Cyrille (cyrillev domain yahoo.fr) on Thu Oct 9th, 2008 at 07:58:07 AM EST
[ Parent ]

ok, updated version


Dear Sir,

The "savings glut" theory which Martin Wolf resurrects ("Asia's Revenge", 9 October) fails to address the root cause of the financial crisis: the reckless dereliction of central bankers and financial leaders in the performance of their duties.

While Asia's mercantilist policies, and their very real desire to no longer have capital account deficits are very real, their savings "glut" has been fully created by policies in the West. Central Banks, led by Alan Greenspan's Fed, maintained absurdly low interest rates despite massive evidence of asset bubbles; in fact, these bubbles were a desired result, as they allowed for massive profits by the financial sector, and made it possible to hide from the general population the stagnation of their incomes caused by other parallel policies such as labor market deregulation. Fundamentally, people in the West lived above their means. Together, these policies created an appearance of prosperity for all (GDP was up, on the back of strong income growth at the top) while effectively organising a vast transfer of wealth from the many to the few.

The Asians were happy to tag along, as it allowed them to develop their infrastructure and economies, but it is unfair to blame them for the fact that the much touted - and very unequally shared - prosperity of the past years in the West was essentially fake.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Oct 9th, 2008 at 10:04:16 AM EST
[ Parent ]
Maybe this change too?
Dear Sir,

The "savings glut" theory which Martin Wolf resurrects ("Asia's Revenge", 9 October) fails to address the root cause of the financial crisis: the reckless dereliction of duty by central bankers and financial leaders in the performance of their duties.



Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Oct 9th, 2008 at 10:30:25 AM EST
[ Parent ]
It's not only dereliction of duty: real interest rates were negative for about 18 months aroung 2003 in the US, and also for a time in Spain (the ECB set interest rates for German levels of inflation) triggering asset bubbles.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Oct 9th, 2008 at 10:34:10 AM EST
[ Parent ]
I now see that the word "duties" was already part of the very sentence I was quoting!

Do completely ignore my comment above.

I need coffee.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Oct 9th, 2008 at 10:40:26 AM EST
[ Parent ]
However, rereading the original sentence:
the reckless dereliction of central bankers and financial leaders in the performance of their duties.
I would consider changing the of to a by. As it is, the sentence seems to indicate that the central bankers where neglected rather than neglectful.
by someone (s0me1smail(a)gmail(d)com) on Thu Oct 9th, 2008 at 10:48:59 AM EST
[ Parent ]
redrafting, because there are too many "very reals"


Dear Sir,
The "savings glut" theory which Martin Wolf resurrects ("Asia's Revenge", 9 October) fails to address the root cause of the financial crisis: the reckless dereliction of duty by central bankers, politicians and financial leaders.

While Asia's mercantilist policies, and their desire to no longer have capital account deficits are very real, their savings surplus has been largely created and fed by policies in the West. Central Banks, led by Alan Greenspan's Fed, maintained absurdly low interest rates despite massive asset bubbles whose existence they denied against all evidence until the last minute. In fact, these bubbles were a desired result, as they allowed for massive profits by the financial sector, and made it possible to hide from the general population the stagnation of their incomes caused by other parallel policies such as labor market deregulation. Fundamentally, people in the Anglo-Saxon world lived above their means. Together, these policies created an appearance of prosperity for all (GDP was up, on the back of strong income growth at the top) while effectively organising a vast transfer of wealth from the many to the few.

The Asians were happy to tag along, as it allowed them to develop their infrastructure and economies, but it is unfair to blame them for the fact that the much touted - and very unequally shared - prosperity of the past years in the West was essentially fake, as the current crisis reveals the hard way.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Oct 9th, 2008 at 10:59:53 AM EST
[ Parent ]

Dear Sirs,

The "savings glut" theory which Martin Wolf resurrects ("Asia's Revenge", 9 October) is a dangerous attempt to find mitigating factors to what is the root cause of the financial crisis: the reckless dereliction of duty by central bankers, politicians and financial leaders.
While Asia's mercantilist policies, and their desire to no longer have capital account deficits, are very real, their savings surplus has been largely created and fed by policies in the West. Central Banks, led by Alan Greenspan's Fed, maintained absurdly low interest rates for too long despite massive asset bubbles whose existence they denied against all evidence until the last possible minute. In fact, these bubbles were a desired result, as they allowed for massive profits by the financial sector, and made it possible to hide from the general population the stagnation of their incomes caused by parallel policy measures such as labor market deregulation. Fundamentally, people in the Western hemisphere lived above their means. Together, these policies created an appearance of prosperity for all (GDP was up, on the back of strong income growth at the top) while effectively organising a vast transfer of wealth from the many to the few.

The Asians were happy to tag along, as it allowed them to develop their infrastructure and economies, but it is unfair to blame them for the fact that the much touted - and very unequally shared - prosperity of the past years in the West was essentially fake, as the current crisis reveals the hard way.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Oct 9th, 2008 at 02:55:11 PM EST
[ Parent ]

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