Academic journal article ABA Banking Journal

The Way We Live Now, Enjoy It While We Can?

Academic journal article ABA Banking Journal

The Way We Live Now, Enjoy It While We Can?

Article excerpt

I WAS INTRIGUED BY AN OP-ED piece in the Jan. 26 edition of the Wall Street Journal by Prof. Jeremy Siegel entitled, "The Way We Live Now." Siegel argues that economic growth and development in China and India are something that should be welcomed by U.S. residents, not feared.

He concludes that as U.S. baby boomers begin retiring in six years, they and their offspring will come to appreciate the expanded economic capacity of China and India. Why? Because the boomers' offspring are unlikely to be able to produce enough goods and services to take care of Ma and Pa and enjoy a rising standard of living for themselves, too. I certainly agree with this.

Where I disagree with Prof. Siegel is how this all will work out. We are not the only developed economy that will want to tap China and India for goods and services in the future. The Japanese and the western Europeans also have rapidly aging populations. But there is one big difference between us and them. In the aggregate, they are saving for their old age while we party on. The chart on this page shows that in 2002 the U.S. national net saving rate (gross saving less the nominal depreciation of the national capital stock) was the lowest net saving rate since the Great Depression!

How are we going to finance all of the goodies from China and India in coming years? Prof. Siegel believes that billions of Chinese and Indian investors will be falling all over themselves to buy U. …

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