Couple of posts earlier I wrote about how increasing leverage and spending was risky.
At least someone agrees with me. The savings rate in the US is on the increase from -6% to 3.4%.
Its interesting to note that most economists and government still think that increasing spending is the answer. What matters is how the increase spending is used. As an individual if you are under financial stress you curtail your expenditure and save a little to get out of strife. So why is it so different for the country as a whole. Well if you can borrow some money and invest in improvement in productivity etc that gives you a higher return than what you borrowed at, well then you are creating value. However, if you borrow to spend, that's digging a deeper hole. I guess what matters more is not whether you have big bailouts but how you use the money to get higher returns than what you borrowed it for.
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