Financial analyst Gary Shilling feels the US spends too much time on consumption and too little time on investing in our future. In this video, he shares what he would do to fix the economy. Following is a transcript of the video.
Gary Shilling: What I think I would like to see is people putting a lot more emphasis on productive work and investment and a lot less on consumption.
Now we are a consumer economy and of course most people from the White House on down get all upset when consumers aren't spending because consumption is 70% of GDP. It's a big chunk. We have the highest consumption to GDP ratio of any country in the world.
So that is what’s driving this economy. But that's fine but who's doing the investing? It's been China that’s doing the investing. Much more than the US. So they invest, they produce the goods, they sell them to us, and then we give them paper, but there’s something written on that paper. And it’s claims. And that’s how they go around the world and buy anything they want.
So I would like to see a lot more emphasis on productive work and investment. Much more of the pattern of the Germans. They're very tough of course, they’re very good at this, but they have really come through with flying colors despite all the problems in Europe in the last 5-6 years because they have a very disciplined approach. Saving, hard work, investing. They have a huge trade surplus. They’re exporting more than they import. We’re the opposite, we perennially import more than we export.
I would like to see a change in, but that’s a change in attitude and that means people have to, if you're an economist you say, that means you have a smaller discount rate. In other words you think that the future is not worth as much as, a lot of people think the future is worth nothing so spend it all today. Don't worry about the future.
Well somebody who has the opposite, more Germanic attitude, says, “Hey. I want to save because the future’s out there and I want to be ready.” And, again, compound interest is going to make that worthwhile.
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