Capitalism is a system based on savings that increases the wealth of any nation. Capitalism begins with savings. Savings is withholding spending some of your earnings on consumption today so that it can be used in the future.
Without savings, capitalism cannot function and wealth cannot be produced. Government spending is not savings. Government handouts are not savings. Government lower interest rates are not savings. Government bailout of businesses and banks that make bad investments are not savings.
Savings can only come from the people, because only people have income that comes from the labor of their hand to produce something that has new value.
Governments do not produce things. New value only comes from new production, in which savings can be gathered.
Here is an excerpt from article by Peter Schiff:
“According to Nobel Prize-winning economist Paul Krugman, only the political cynicism of Republicans, who try to wring votes out of Americans’ misplaced hopes for upward mobility and their stubborn fixation on thrift, prevents this painless and readily available cure.
But as usual, they have it exactly backwards. The savings that they find so unproductive is actually the foundation upon which the economy rests. Nothing can be consumed until it is produced. The act of spending is meaningless without something to buy. The savings of the rich forms the capital that funds business investment which increases productivity. The more that society produces, the more that can be consumed. The key here is the supply, not the demand. The grass that feeds the zebras comes from seeds, not rain. Capitalists provide the surplus seeds that are planted. “
Many of the leading economists of the day seem to think like Mr. Krugman, who blames the economic problems on our “stubborn fixation on thrift” – or in other words our savings.
This is crazy as I have just explained, because savings is necessary for capitalism to produce new wealth. If all we do is eat our seeds (spend our capital), we will have no harvest for the future. Wealth comes from savings. Without savings, no wealth.
What we really need is new value being created today. And that cannot happen unless capitalism is allowed to function, which means people are saving and investing money. It is easy to convince people to spend money and the government has been doing that for 25+ years.
But the last 10 years, the government went way beyond letting people spend all their money, they have taken an active role is helping and rewarding people for spending all the money they can, even old money and future money.
Until our nation returns to its senses and rewards people for savings there is not going to be an economic recovery.