Friday, November 14, 2008

Some things need 'splainin

The financial schlamozzle has forced me learn more about a whole host of financial terms than, frankly, I cared to know. In the process, it became clear that either I am completely ineducable -- full disclosure: this is my default option -- or that people who are paid to know better have little more insight into their professional area of expertise than a dog does of logarithms.

To wit: the US household savings rate.

Revving the WayBack machine nearly to the redline, what I remember from Econ 101 is that savings is the difference between income and the consumption of goods and services. According to the Bureau of Economic Analysis, I'm not too far off the mark: Personal saving. Personal income less the sum of personal outlays and personal current taxes.

Fine. That seems simple enough. If I spend every bit of what I earn, then my savings rate is zero.

According to, well, just about every expert who has rustled his vocal cords or pestered his keyboard on the subject, the US household savings rate has been in a nearly linear decline from around 8% through 1980, to an excellent approximation of zero today.



Looks like the whole country has taken a pass on that whole rainy day thing.

Or has it?

As simple as the BEA's definition of personal saving is, nearly every term is undefined. Personal income: is that pre- or post-tax? Which taxes; income only, or the whole panoply? Outlays: what counts as an outlay?

One consequence of this definitional quicksand is deciding whether 401(k) and IRA contributions are included in the national savings rate.

According to the Federal Reserve Bank of San Francisco, Yes.
Since IRA and 401(k) contributions are not part of personal outlays (and, therefore, must be included in the difference between personal income and personal outlays), these contributions are included in national saving computations.
According to Stephen G. Peasley, president of KPP Financial, No.
The BEA definition is the amount left over from disposable personal income after expenditures on personal consumption, interest payments and net current transfer payments. In other words, how much of your after-tax income, minus all expenses, is available for you to spend.
Which completely excludes 401(k) and IRA contributions.

For Pete's sake, I'm not asking for the origin of the universe here.

On the face of it, the FRB o' SF should win on authority points. However, extensive Googling -- about two hours worth, to be exact -- yielded a pronounced split on the question. Nearly the same number of hits said no as yes, and the disagreement centered on whether personal income was disposable income after taxes, or gross income.

There are several tie-breakers. The first is contained in a paper written for the BEA (FRB o' SF, sit up and pay attention here), the point of which was to list the ways the BEA could improve its statistical methodology. One of its conclusions was that the narrow National Income Production Account (NIPA) differs from a comprehensive measure "that includes savings in pensions and capital gains on equities."

So what?
The narrow measure showed a low rate, which declined from the 1980s to the 1990s. The comprehensive measure showed a very healthy savings rate of 25 percent for the 1990s. The latter measure better corresponds to the flush of wealth that households actually experienced, and indeed it probably explains the decline in the narrowly defined savings rate.
The second tie breaker is the chart above. The NIPA savings rate had been fairly stable from 1960 through 1980, at 9%, give or take 1%, then declined linearly to around 0% today.

At the risk of falling prey to post hoc reasoning, it is worth asking: What happened in 1980? Section 401(k) was added to the IRS code on Jan 1 of that year.

Finally, according to a recent Wall Street Journal (about how some Democritters want to appropriate 401(k) assets), 60% of Americans have 401(k) accounts, worth $3 trillion.

The ROBA (risk of blowing an aneurysm) meter is shooting into the red here. For Pete's sake, again, people define your frickin terms. Perhaps it is my software engineering background, or the precision that being a pilot requires, but somehow I don't think it asking to much to properly label things. Working age people account for 63% of all Americans. So, does the WSJ article mean that 95% of all working age Americans have 401(k) accounts? Well, that obviously can't be true, since not all working age Americans work. Perhaps the article means 60% of the 66.2% of the labor force with a job, or about 40% of all Americans, have made 401(k) contributions.

I'll go with that, if for no other reason than the result at least wanders within hailing distance of the plausible; 120 million Americans have 401(k)s worth 3 trillion as of this week. (Note, as of this year, there are roughly 75 million households in the US, at about 2.5 persons per household And, no, now that you mention it, I am not about to hunt down what the heck a household is, or what bin the other 113 million people in the US are pitched into.)

Squeezing the numbers through a calculator, from a starting point of zero in 1980, 120 million American wage earners accumulated an average $25,000 each in 401(k) accounts.

Is this consistent with a declining savings rate? I think not. And what about IRAs?

Sheesh. Four hours of research, and I don't even have a handle on personal income.

What the heck is a personal outlay? Well, according to the BEA: Personal outlays. The sum of personal consumption expenditures (PCE), personal interest payments, and personal current transfer payments.

Okay, what the heck is PCE? Personal consumption expenditures (PCE). The goods and services purchased by persons.

Okay, what the heck are goods? The combination of Durable (tangible products that have an average lifetime of at least three years) and Nondurable goods, aka Cheap Junk.

Finally, Services. Products that cannot be stored and are consumed at the place and time of their purchase.

That pretty much sums it up, right? Right? Heck, I dunno. If I buy stock, where does that fit? How about contributing to a 529 (education savings scheme)?

What about the houses we live in? Assuming a 2500 square foot house, and $125 per square foot to throw it all together, that comes to $313,000. I'm going to ignore the dirt it sits on, since that is neither a good, nor a service. That amount, absent interest, will be covered in less than 18 years at $1500 per month. The median age of owner occupied homes in the US was 30 yrs in 2001 Just guessing here, but that probably means roughly 3/4 of all mortgage payments in the US go for neither goods nor services.

In the absence of hard data, I am going to extrapolate from personal experience. According to the NIPA notion (assuming that notion excludes 401(k)-ish stuff), my savings rate in 2008 was 6%. Include 401(k) contributions, and it goes to 20%. I have increased the payments on my 30-yr fixed rate mortgage to yield a 15-yr payoff. That makes my savings rate something like 30%. Unless, of course, increasing the payoff rate is counted as increased spending -- which it appears to be -- meaning paying off my house sooner means a lower saving rate, down to 10%. Toss in 529 contributions, and it goes to 33%. Unless it is 13%.

I have no earthly idea which of these numbers is "correct"; however, I strongly suspect that the NIPA number we all read about is way at the lower end of that range.

Which means it has heck all to do with reality.

Why am I ranting? A whole host of reasons.

  • Depending upon the real answers, there could be a serious disconnect between the objective reality of the national savings rate.

  • The MSM's reporting (and deriding) of it could well reveal professional malfeasance, or negligence, of the very first order.

  • The consequence of this reporting could be too encourage people to save more when, in general, they are saving plenty already.

  • Additionally, the credit crunch could be very short lived. Mortgage payments and 401(k) contributions continue to inject a heck of a lot of liquidity into the system. (As it turns out, I saw on a news crawl yesterday that bank reserves are now well above required levels).

  • Finally, it raises the question How the heck much do we need to save, anyway? Near as I can tell, there are three reasons to save: to cover emergency expenditures, including interruption of the primary income stream; anticipatory saving for replacing medium cost durable goods (major appliances, say); and to provide post-retirement resources.

Well, based on that, how the heck much do we need to save? The emergency reserve amount is relatively fixed, whatever it may be. Having achieved it, there is no point saving any further. Anticipatory saving, by definition, nets to zero.

Which leaves retirement saving, about which the headline savings rate seems to say nothing.

Unless it does.

After over five hours of research and writing, I still have no idea.

Maybe I am a completely ineducable glorified heavy equipment operator.

25 Comments:

Blogger erp said...

It's takes years of study to learn how to employ so many words and numbers without imparting any meaning. In your life, facts aren't fluid. Everybody agrees on the properties of gravity, thermodynamics or whatnot. New ideas are proven or discarded, not so in economics where nothing can be proven and everything is possible.

You are so right that there can be no discussion without a definition of terms.

Savings? To the generation prior to mine, savings meant putting the change and small bills left over at the end of the week into cigar boxes. To my generation, it meant automatic deposits to a pass book account at the bank. Now it means any number things including the above and the financial plans you mention.

Clinton politicized everything including financial reporting. Just as when there's a Democrat in the White House, homelessness disappears, when a Democrat is in the White House, financial crises that can't be blamed on Republicans disappear (at least they disappear from public notice).

Watch what politicians are doing, not what they're saying for a better idea of the economic picture.

The left needs crisis to scare people so they'll happily exchange their freedom for the security of the nanny state. That's why they orchestrated the recent collapse of the institutions they put into place to redistribute our income and that's why Obama won. (Well that and voter fraud on a massive scale.)

In order to solve the "problem," more "safeguards" will be put into place and happy days will be here again, at least for Democratic politicians.

I don't envy you trying to negotiate your financial future when the rules get changed in mid-stream. Too much personal security in the form of savings, no matter how defined, is anathema to the left and they will try to grab off as much as they can -- it's for the children ya know.

If I needed to think about the future, I'd probably put a goodly portion of cash on hand somewhere off shore where the feds can't get at it. Where? Swiss bank account, Cayman Islands, Costa Rica?? An awful lot of people are buying property and traveling back and forth to Costa Rica of late.

November 15, 2008 7:04 AM  
Blogger Harry Eagar said...

So clever of the Dems to engineer the Crash of '29. And the oil shock of '73, although that one didn't work out so well for them, did it?

Sheesh.

Skipper, I applaud your diligence but deplore your frame of reference.

We're operating in Reaganomics mode, you know, and according to Reaganomics debt = savings.

Once you accept that, calculations about personal income flows seem beside the point.

'there could be a serious disconnect'


There sure could.

November 15, 2008 11:17 AM  
Blogger Hey Skipper said...

We're operating in Reaganomics mode, you know, and according to Reaganomics debt = savings.

That is pure nonsense.

If you read the report I linked to about improving BEA reports, you would find serious criticism about the BEA using parameters that have long become irrelevant, or largely fail to capture economic behavior.

My savings in fact equal savings, as they represent income not spent on goods and services. Yet, near as I can tell, the NIPA statistics act as if it didn't happen.

What's worse, your profession reports these numbers with astonishing credulity.

Whether through negligence, malfeasance, intellectual lassitude or pulse-slowing stupidity is hard to tell.

November 15, 2008 2:39 PM  
Blogger Hey Skipper said...

erp:

Savings? To the generation prior to mine, savings meant putting the change and small bills left over at the end of the week into cigar boxes. To my generation, it meant automatic deposits to a pass book account at the bank. Now it means any number things including the above and the financial plans you mention.

Yes, and the BEA should acknowledge that.

And the bozos who call themselves reporters should spend just a few hours out of one day -- like I did -- to get a handle on what they are saying, instead of getting paid for keyboard doodling.

I subscribe to The Economist. From the title, you would at least think they would get this stuff straight.

In one issue a few weeks back, they mentioned the US savings rate, after long decline, had finally reached, or gone slightly below zero. Not the merest qualification of the term.

Two articles later, the US household debt -- without defining the term -- was said to have, after a long period of gradually increasing, finally reached 100% of income.

Both of these assertions cannot possibly be true at the same time. Making matters worse, the second article left out that pesky thing called "time".

Income is a function of time. 100% of annual income is a much different number than 100% of monthly, or weekly, income.

For Pete's sake, boneheads, qualify your frickin numbers!

Clinton politicized everything including financial reporting.

BEA inertia, aided by journalistic sloppiness that makes a dog's breakfast seem sanitary by comparison, is to blame here.

November 15, 2008 3:10 PM  
Blogger Harry Eagar said...

Well, I don't. I can't control what other business reporters do. I'm not an admirer of most of them.

(I seldom read the business press; I get most of my information from academic monographs and personal interviews. Only one business in my catchment area is an SEC reporter, which makes my job easier. As Mahan Atma says, faith-based accounting doesn't work.)

Most economic statistics, like global warming statistics, have a lot more air in them than people who reify single numbers want to admit.

If you think savings rates are hard to figure, try to get a hard number for unemployment.

November 15, 2008 4:01 PM  
Blogger Hey Skipper said...

Harry:

This post was more a series of questions than a statement about the MSM's competence.

Do 401(k) contributions count as savings?

What about stock purchases?

November 15, 2008 6:40 PM  
Blogger Harry Eagar said...

In my view, yes to both, although, as we have seen lately, hard to quantify.

Orrin used to say we were all saving like mad because our assets were up, thanks to house prices.

For useful purposes, savings are items that are liquid. It depends how fast you need access. Houses are illiquid.

Old-fashioned financial advisers said each family should have liquid savings equal of 6 months after-tax income. (The reason being that if all your income is cut off, it takes 6 months for the safety net to kick in.)

Few younger persons ever manage to have savings of that sort, and since if you don't, you may have to liquidate illquid assets, in that sense most younger Americans can be said to have little or no savings.

A 401(k) owned by a 64-year-old man does not have the same value as the same block of paper owned by a 54-year-old, because the 64-year-old has fewer options to manage it. He may have to sell at today's market price, while the 54-year-old can gamble that his holdings will appreciate over 10 years.

Mormons like to keep six months supply of imperishable food on hand. Depending on circumstances, that might be the most valuable form of savings of all.

Personal savings don't mean much. Unless you have a much money as Bill Gates, your savings will be wiped out by a couple of bad medical experiences.

For almost all individualss, savings is the public safety net.

The economic concern is not about personal savings but national account. We're deep in the hole there, no savings at all.

(Although there is an argument -- to which I give little credence -- that if government accounting was on a business basis, rather than cash in, cash out, the books would look much healthier.)

November 16, 2008 11:02 AM  
Blogger Bret said...

Ahhh, the meaning of savings and investment. That's one of my favorite topics!

Here's a thought experiment to further confuse you.

I often like to use a Hypothetical Static Economy as a context in which to think about such things. In the HSE, everybody lives forever and has the same job forever, gets paid the same, maintains the same consumption patterns, etc. The HSE implies that there is no innovations, net creation of capital equipment, etc. The HSE is a closed system.

Let's say that in the HSE, that absolutely everybody saves exactly 10% of their after tax income. Let's say they put this money in checking accounts (with no interest).

So year in, year out, savings accumulate. Forever.

Where does this money come from? One possibility is that the government pays some percentage of its costs with newly created fiat currency. That money filters into the economy and then back out when people save it.

Perfectly static, no growth, yet people save.

Obviously, in the HSE, it doesn't matter if it's 10%, 2%, 0%, or even a negative savings rate (though that requires extra explanation which we'll skip for now).

That's all! Have fun with it.

November 16, 2008 10:59 PM  
Blogger erp said...

Bret, Are you saying that savings and investment are the same thing?

November 17, 2008 5:12 AM  
Blogger David said...

I could have sworn I once wrote a long blog post about this, but I can't find it at either the secret blog or at BrothersJudd.

Here's a decent explanation.

Basically, the problem is that the savings rate is not something people go out to study independently. Rather, it is ginned together using information from the National Income and Product Accounts from BEA, the primary purpose of which is to determine GDP. Because GDP doesn't include capital gains, the national savings rate ignores capital gains. So, if you sell stocks, or your house, for more than you paid, the savings rate ignores the gain. So if you spend part of the gain and bank the rest, NIPA treats that as dis-savings. On the other hand, your capital gain taxes are a drain against income.

Also, pension and 401k, etc., payments are not income. So any amount spent by retirees above their income is counted as dis-saving.

I did find a Excel spreadsheet from my phantom blog post in which, apparently, I calculated a real savings rate for 2005 of a little better than 8%, but I can't tell how I did it.

November 17, 2008 5:20 AM  
Blogger Hey Skipper said...

Harry:

The intent behind my question regarding 401(k) contributions as savings was completely unclear, so here it is again.

When the BEA reports the national savings rate, does that rate include 401(k) and IRA contributions? It is a completely honest question, since despite several hours of research, I still have no earthly idea.

Same thing for mortgage payments. For most houses in the US, the payments are no longer purchasing either a good, or a service. To my glorified heavy equipment operator mind, that sounds like an ocean of cash that seems to be in the wrong bucket.

Old-fashioned financial advisers said each family should have liquid savings equal of 6 months after-tax income.

Which is the first of the three reasons for saving I noted in the post.

Now it is back-of-the-envelope math time. If I am starting from zero, at 8% savings rate (simplest definition) how long would it take to reach 50% of my annual income, excluding interest earned on savings along the way?

Oh, slightly more than six years. Say my income increases at 5% (simple, not compound) per year, and I want to maintain that 50% buffer, what does my savings rate have to be each year after the seventh year? Something like 2%. Which means my actual savings rate could be roughly 1%, because even passbook savings accounts get 2%.

Which leads to what should be the most fundamental question: what should the savings rate be?

Near as I can tell, as long as 401(k) and IRA contributions are excluded, the number should be very close to zero. Having established my 6-month income buffer, there is hardly any point in padding it further, and a considerable cost for doing so. Saving for major purchases is inherently going to zero out over time.

That leaves savings for retirement. The savings rate excludes social security taxes (15% of before tax income) despite the assertion there will be a return on that investment, and, apparently, anything we do on our own.

Given those entering arguments, why isn't a savings rate of zero the answer one would expect?

For that matter, since most people live long enough for a fairly lengthy retirement, which, by definition, is dissaving all the retirement savings, why isn't the overall savings rate zero?

Personal savings don't mean much. Unless you have a much money as Bill Gates, your savings will be wiped out by a couple of bad medical experiences.

Well, of course a string of sufficiently bad luck will suffice to wipe out anything -- including the worth of Mr. Gates fortune to him should he be hit by a truck.

However, that is no reason to strike a nihilistic pose and conclude that personal savings don't mean much in the face of ordinary pitfalls.

The economic concern is not about personal savings but national account. We're deep in the hole there, no savings at all.

I'm not sure what "savings" means for a national economy. I'm pretty certain that government running a perpetual surplus would not be a good thing. Also, constraining government spending by having to return a portion of it as interest doesn't necessarily seem a bad thing, either.

As it turns out, our national debt is about 80% of annual GDP. Oddly, that is on the low end of average for industrial economies. Japan's debt:GDP is about 1.4. Also, our annual government budget deficits expressed as a portion of GDP is right in the middle of the pack.

Granting the parallels between personal and public are often strained, if my debt:annual income was merely .8 I would be thrilled.

However, thanks to a mortgage, for me it is 2.5.

Hard to see why the former is so horrible if the latter is not.


Bret:

Perfectly static, no growth, yet people save.

Your HSE is way over my head. One problem I have getting a grasp on it is its very stasis. In order for there to be any net saving in the HSE, the average HSE citizen must earn more than the average HSE citizen spends (the value of that citizen's time in employment is worth more than the average citizen's cost of employment, plus production inputs).

Put that way, I don't see how a static economy can have any savings at all.

David:

Thanks for the link. Reading reading reading ...

To reverse this trend, consumption would have to grow about one half a percent less than disposable income in future years, an about-face of the pattern of the past ten years when consumption's rise was at a faster pace than that of disposable income.

Now, about that disposable income. It is a function of both actual income and the CPI, right? But what it the CPI overstates actual inflation?

As the share of the population 65 and over starts to rise relative to that of 15-64 year olds, aggregate savings will increase only if younger households save more or older households work longer. If you think low savings is a consumer problem today, just wait until 2020.

This again raises the question of what the savings rate should be. (Although her statement does appear rhetorical ...)

To this heavy equipment operator's mind, personal savings should be sufficient to allow counter-cyclical spending, so as to avoid having consumer spending whipsawing the economy. If I have a fair amount of money on hand, then I am less likely to sharply contract spending in the face of hysterical MSM stories about our national savings rate.

++++

Still need some help here, though.

How does mortgage payments figure in to all of this? For roughly 3/4 of the housing stock, those payments are purchasing neither goods nor services, but are counted as if they do.

Sounds to me like a perpetual flow of liquidity into the system.

But what the heck do I know. I'm still trying to figure out why the airplane I fly continually goons up energy management during the arrival phase.

And that is simple TE = PE + KE stuff.

November 17, 2008 10:58 AM  
Blogger Harry Eagar said...

'However, that is no reason to strike a nihilistic pose and conclude that personal savings don't mean much in the face of ordinary pitfalls.'

A friend of mine, a small businessman with around a dozen employees, has been showing me the bills for his wife, who has cancer.

He and his employees have health insurance. Not a gold-plated policy but better than most.

He's wiped out. So would the vast majority of people be, and we haven't even mentioned nursing homes.

You can insure against catastrophes, but you cannot save against them.

I don't conclude you shouldn't save, but I do conclude you shouldn't count on it. Especially if you trusted your stock broker.

November 17, 2008 12:02 PM  
Blogger Hey Skipper said...

I don't conclude you shouldn't save, but I do conclude you shouldn't count on it. Especially if you trusted your stock broker.

Savings and insurance are two entirely different topics and I'm having enough trouble getting my arms around just the savings thing.

People save for exigencies that are foreseeable and of sufficiently low cost and high likelihood as to make the exercise both worthwhile and doable.

For everything else, there is insurance.

But, like I said, that is a different topic.

November 17, 2008 12:32 PM  
Blogger Harry Eagar said...

Well, then, let's ask: why is savings important? In aggregate.

Beats me.

It used to be that savings were needed for investment. For the last 20-25 years, for reasons I do not understand -- nobody else seems to have noticed it, either -- the world has been awash in excess capital.

November 18, 2008 9:37 AM  
Blogger Hey Skipper said...

[Why] is savings important? In aggregate.

Well, I suppose, for the reason you state: without savings there are no resources available for investment.

However, the bigger question is how, given Brett's HSE hypothetical, is how savings are even possible. In order for there to be such a thing, people, in aggregate, must be able to generate more Persuaders (my term for a generic universal medium of exchange -- because Persuaders persuade people to do things for you, or give things to you).

Near as I can tell, Persuaders are a storage device for time, with a multiplicative constant thrown in. The number of Persuaders I pile up in an hour is much greater as a glorified heavy equipment operator than, say, building Fords.

In order for savings to be possible, in the aggregate, the aggregate multiplicative constant for time must be greater than one, where one represents the minimum number of Persuaders required for sustenance.

There is only one reason that constant is greater than one (in the aggregate): the wide availability of high-BTU non-human energy.

For the last 20-25 years, for reasons I do not understand -- nobody else seems to have noticed it, either -- the world has been awash in excess capital.

I bought my first Apple II in 1981. That was 27 years ago.

For a number of years, some academic (whose name I am sure you will recall in an instant, but escapes me entirely) insisted widespread and cheap computational power had no effect on productivity.

Turns out he was dead wrong.

The world has been awash in excess capital over the past couple decades because productivity has been increasing at an annual rate to the extent that it has probably doubled over the last twenty years.

When you throw hedonic inflation into the mix, people are getting more for fewer Persuaders (meaning, of course, less time), while it takes less to produce what people are getting more of.

What else can you get from that except excess capital?

And that is before throwing the China into the mix, with its rigging of the RMB exchange rate.

November 18, 2008 10:46 AM  
Blogger Harry Eagar said...

Hmm, I put up a longish post yesterday that reported itself to be saved but disappeared. I'm too lazy to repeat all of it, but generally I agree with your last post.

When it comes to creation/redeployment of capital, here's one example (the original post had several):

In 1968, at my first full-time newspaper job, we had 120 compositors. After the introduction of cold type, 7.

Some of the revenue (but not too much) that had gone to the printers came into the newsroom. Most went to the already very healthy ROI that newspapers enjoyed in those days.

The particular owner I worked for used the savings to invent the Weather Channel, which his heirs have recently been shopping around for $5 billion.

The Weather Channel is a piece of crap -- very popular crap -- so I don't know if there's a net gain there socially.

The destruction of a 500-year-old class of highly literate handworkers was sad and a definite social loss.

November 21, 2008 9:39 AM  
Blogger Hey Skipper said...

The destruction of a 500-year-old class of highly literate handworkers was sad and a definite social loss.

No sadder than the destruction of, say, the wheelwright class.

What are the kids of that class doing today?

++++

Implicit In my musings about Persuaders as a physical instantiation of time (I'm surprised Bret hasn't told me how ignorant this must be), is that, so long as the aggregate multiplicative constant is significantly greater than one, people will trade excess Persuaders for mere activity.

Hence, among other things, The Weather Channel, ESPNews, E!, and Blogspot.

++++

Hmm, I put up a longish post yesterday that reported itself to be saved but disappeared ...

Having been similarly burned several times, I do all my composing in a text editor set to auto-save every 5 minutes.

When I'm done, Ctrl-A > Ctrl-C > select posting window > Ctrl-V > Submit.

November 21, 2008 10:36 AM  
Blogger erp said...

Harry, it's always sad when a traditional way of doing things is no longer required, but don't you think it foolish to want to keep doing things the old way when the need no longer exists? The written word doesn't need to be printed by typesetters any more. It can be printed in dozens, in not hundreds, of fonts from a laptop to a wireless printer many rooms away.

Isn't it the message, not the medium, that's important?

Completely off topic, but I've been reading about the Amish and putting aside questions of religion, shunning, etc. what I find tedious, is their doing domestic, farming and carpentry chores in time consuming and inefficient ways.

They eschew cars, electricity, telephones, yet they ride in cars of the so-called English people, borrow use of their telephones, accept treatment from their medical facilities. They use propane gas, if not electricity, to cook and power their tools and they wreak havoc driving their buggies on highways where a minimum 40 mph speed is posted.

It seems to me, a nonreligious person, that they pick and choose which among God's gifts they are willing accept.

Are we all guilty to some extent of holding on to the traditions we like while throwing the ones we don't like under the bus (I love that expression) with alacrity?

November 21, 2008 11:01 AM  
Blogger Hey Skipper said...

I lived in England during the early 80s.

At that time, the unions still held sway. Among those unions were whatever the typesetters called themselves.

The measure the miss-sets, typos and wordos (or whatever the newspaper printing term for all these errors) per column inch was at least two.

Like erp said, modern methods are huge improvement.

November 21, 2008 12:17 PM  
Blogger Harry Eagar said...

In the basements of many a newspaperman (though not mine), you'll find old presses and boxes of type. Some people admire letterpress, because digital is not quite as good. Good enough, maybe, like the Brazilian shoes you are wearing, but not really good.

No different from the black powder shooters.

What we lost and did not replace was a literate tradition, separate from the more familiar ones and valuable for people who value literacy.

Skipper, Evelyn Waugh said that in England it was no longer possible to find competent proofreaders after the Church of England stopped defrocking clergymen for homosexuality. It wasn't the unions.

Curiously enough, Lancaster County, Pa., had (and may still have, I haven't checked lately) the highest farm receipts of any county in the country for about 250 years, despite it primitive methods.

I am amused that the Anglos describe the Amish as 'wreaking havoc' on the roads. Last time I was in York (back in the '70s), the commiseration went the other way: People felt sorry for the Amish being slaughtered by heedless motorists.

November 21, 2008 1:30 PM  
Blogger Bret said...

hey skipper wrote: "However, the bigger question is how, given Brett's HSE hypothetical, is how savings are even possible."

Net savings doesn't happen until somebody employs resources (labor, capital, etc.) in order to increase the stream of future goods and services for which there is demand.

With fiat currencies, at least in theory, individuals need not save a dime in order for that investment to happen. They only need to bear temporary higher costs for goods and services while those resources are deployed but not yet productive. They have no choice in doing so if the government makes money available (via liquidity infusions) for businesses to compete with consumers for those resources. This particular example would look like a low grade inflation with temporarily stagnant wages.

An individual putting money in the bank is far less important than having adequate investment capital available to businesses through some means, though personal bank deposits is one such method.

November 21, 2008 4:26 PM  
Blogger erp said...

Harry, why was literary tradition lost because type stopped being set by hand? Typesetters didn't write the copy and probably didn't even read it.

Un-defrocked homosexual priests the cause of typographical errors. Wow. Pretty amazing if you think about it.

Horse buggies cause accidents on roads made for auto traffic. It's not surprising that Amish truck farms produce excellent produce on a small scale much like farmers' markets in small towns. It signifies nothing except locally grown stuff tastes better than stuff shipped from Chile or Guatemala.

November 21, 2008 7:24 PM  
Blogger Harry Eagar said...

Oh yes, the printers did read what they composed. I used to be able to read copy off lead type upside down and backward as fast as you can read a printed page.

They were a repository of knowledge and opinion separate from the others. Scattering them was akin to, if not quite as dramatic as, closing monasteries.

All copy has errors. Without the unfrocked priests to correct them, they got into the market.

I don't know if you've been to Lancaster County, erp. It doesn't sound like it. Those aren't truck farms. They made their money in dairy. The milk in Hershey's milk chocolate.

In the 18th c., Lancaster was wheat country, in the 19th mixed farming. The Dutch were just better farmers than the Anglos.

Farms in Lancaster have soil as good as when it was first settled. In Iowa, half the topsoil was gone in the first 120 years.

It's true that markets favor big prairie farms, but that's because markets are stupid, don't know how to value inputs.

November 22, 2008 12:16 PM  
Blogger erp said...

I stand corrected.

November 22, 2008 3:55 PM  
Blogger Harry Eagar said...

I've been trying to understand Bret's remarks, but can't quite do it.

Anyhow, I disagree at least in part. And for the recent increase in available capital, I think it is an important part.

One way to create capital without new saving (whether by manipulating fiat money or otherwise) is to redeploy established capital (however it came to exist).

That was my point about printers. One of my other recent examples were the Sister Kenney Foundation, made unnecessary by Salk's vaccine).

The classic example is the Black Ball Line, which without a penny of new investment freed up the merchant capital of New York City, which had been tied up in Liverpool counting houses because of unpredictable shipping schedules.

By putting transAtlantic shipments on a schedule, American merchants could turn over their capital 3 or 4 times a year, instead of once.

They redeployed their money into Erie Canal bonds, which increased the capital value of the land in the Northwest etc.

November 23, 2008 11:10 AM  

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