[Icon]

All of these require physical instruments, which must be manufactured. Logistics in particular, directly services manufacturing companies. I mentioned finance because finance has been the primary driver of GDP growth (replacing manufacturing in this role) for the last 25 years.

I still fail to see why it is necessary for the American economy to be in the middle of the value-added chain rather than at the end of it.

Microsoft is not a manufacturing company, and does not produce a physical product. It adds value to electronics manufacturing by producing the software it requires.

A CD containing Windows (or maybe it's DVDs now, I haven't used installed any of their OSes since XP) physically exists. Even if you say the disc was manufactured in China (probably true), CDs aren't magical circles that pull data out of a black hole.

The machine code for the operations the software orders the processor to perform physically exist on the disc, even if the individual bits are microscopic.

Those operations are the result of compiled source code, which is developed by human beings.

Over a third of the US population have four-year degrees. The majority of people with four-year degrees opt for useless degrees however, because they are not smart enough to pursue elite professional training.

Evidence of this? I'm not saying you're wrong, but I'd like to see numbers.

[Dr House]

I still fail to see why it is necessary for the American economy to be in the middle of the value-added chain rather than at the end of it.

I've said no such thing. All countries should strive to be as high as possible in the value-added chain.

What I was saying is that the top end of the value-added chain is in the secondary, rather than tertiary sector. Services are not the next, higher step after manufacturing.

Evidence of this? I'm not saying you're wrong, but I'd like to see numbers.

[Icon]

I was more interested in data regarding the 'majority getting useless degrees' comment.

[Dr House]

I can't find a breakdown of college students by major, but I distinctly remember reading that political science, which is worthless, is the most popular major.

[Wolfman]

I can't find a breakdown of college students by major, but I distinctly remember reading that political science, which is worthless, is the most popular major.

I believe the difference between that and the next closest is very small. In which case a 'most common' is kind of pointless. Kinda like saying being a Democrat is the most popular political affliation, when the GOP isn't very far behind.

Also, it's not as simple as 'manufacture, service'.
http://en.wikipedia.org/wiki/Primary_sector Primary, getting raw resources (farming, mining, wood cutting)
http://en.wikipedia.org/wiki/Secondary_ ... he_economy Secondary, industrial manufacturing (making hammers and consumer goods)
http://en.wikipedia.org/wiki/Tertiary_s ... he_economy Teriary, industrial services (mechanics, teachers, so on)
http://en.wikipedia.org/wiki/Quaternary ... he_economy Quaternary, money services (banking, investments, insurance)
http://en.wikipedia.org/wiki/Quinary_se ... he_economy Quinary, mostly related to government functions (police, firefghters, so on)

[greysnow]

Savings are needed to fund capital investment. Insufficient savings can starve an economy of it and cause the stock of fixed capital to decline, which would adversely impact people's quality of life. This has been happening in the US for decades now.

That's as maybe, but don't mix it up with pensions. If for some reason there is high inflation or a crisis like now where banks simply go broke, your retirement savings plan could be worthless in a minute. The way we're doing it is we support the pensioners from the whole current GDP (mostly, unfortunately, in Germany the rich are able to wiggle out of the system). Much more sensible.

The German pension fund, like all pension funds in the West, has a shelf life due to adverse demographics. It additionally creates a disincentive to save, which creates the problems I mentioned earlier.

It's still viable and will be for a long time as long as certain buttons are tweaked to adjust the system to the demographics. But it's not my favorite system by any means. I'm for a system where the pensioners get a decent share out of the GDP, by whatever means. Simple redistribution.

A non-economic argument against welfare would be that it reduces the economic role of the family, which fractures the community and creates atomistic, materialistic individuals. Paying people to do nothing additionally destroys their self-worth by making them feel useless.

I would say welfare conditional on people performing community work, art, or otherwise contributing in some way to society would be much better than no-strings welfare.

Welfare reduces the economic role of unreliable or abusive families too. Communities have long been fractured, indeed since the growth of the cities associated with the industrial revolution, and in a city you were not able to rely on your neighbors even before the advent of welfare. Welfare amended that. First of all though, it gives people a living when they can't find a job because there are too few jobs. Paying people when they can earn nothing may destroy their self-worth (why are you so concerned for this? And it is untrue in a large percentage of cases anyway) but not paying them will destroy their life or at least make it a howling misery. And making them turn to charity or to coming running back to the fold IMO is apt to destroy their self-worth equally or even more than demanding their assured rights (so, honestly, your self-worth argument smells a little like bullshit), not to mention the fact that your family doesn't have to provide for you and it is not certain that there is enough charity to help everyone who needs it. Welfare needs to be a last-line guarantee that you will not starve and go unhoused and unclothed.

Well, I am pro human rights, and I guess you are not. No need to repeat it, spare your e-breath.

Hardline capitalist theoreticians, it seems, like to posit a bullshit ideal of caring in the community to complement for the lack of common decency in their economic system. That is just shunting the responsibility for supporting the losers of the game to a fantasy, and not even a necessarily desirable fantasy at that.

Because college education is costly, and education in general needs to first and foremost provide positive economic returns. Ideally, very few people should go to college.

In an age when competition is almost always through knowledge and skills? What?

People who should instead learn skilled trades that are being abandoned in the US (The average age of US machinists is 55, and there are only 2,000 tool and die apprentices in the entire nation).

You and Dave share the same sources independently or do you rely on each other as a source of information? Do you check his figures?

Europe does well at this, and only about 15% of Western Europeans have a 4-year degree compared to 35% of Americans.

21 % of Germans in 2005 had a university degree. The OECD average of tertiary education graduates is 35% (only in developed countries, I presume; OECD tables are only available through subscription, it seems), so Germany is actually far behind. Where do you get your figures from? 15% is far from the mark. (There may be some 3-year degrees hidden in the 35%, but not in the German 21%, I assure you.) Conservative magazines and liberal magazines in Germany alike are clamoring for more university students (mostly sciences and engineering, naturally).

And no, education does not just have to provide an economic return. It provides other kinds of returns too that are valuable in another sense.

[Icon]

And no, education does not just have to provide an economic return. It provides other kinds of returns too that are valuable in another sense.

I would generally hold that there's no such thing as a non-economic return.

[greysnow]

Chalk it up to my imperfect English. I mean: education is good for you, even the part of it that cannot be directly converted into money.

[Dr House]

That's as maybe

Where else can investment originate, if not savings?

but don't mix it up with pensions.

Pensions create a disincentive to save, and the bulk of savings of any household are for retirement. I don't see how separating the two is possible.

If for some reason there is high inflation or a crisis like now where banks simply go broke, your retirement savings plan could be worthless in a minute.

Then the way to go is look a solution for asset bubbles and crashes, rather than starving the economy of capital in the name of social security.

It's still viable and will be for a long time as long as certain buttons are tweaked to adjust the system to the demographics. But it's not my favorite system by any means. I'm for a system where the pensioners get a decent share out of the GDP, by whatever means. Simple redistribution.

That would not solve the dissavings problem.

In an age when competition is almost always through knowledge and skills? What?

College only confers useful workforce skills to people in high-level professional career tracks (doctors, engineers, accountants, et al). Many college students take liberal arts degrees which are fine intellectually, but confer no useful workforce skills and represent an economic drain on society, and the individual in question. By general rule, people who lack the intellectual capacity to go into math, science or high-level technical fields should refrain from wasting time in college and instead learn a skilled trade, which would be more economically useful.

You and Dave share the same sources independently or do you rely on each other as a source of information?

We rely on each other as information sources. I rely on him more often than he on me though.

Do you check his figures?

Yes.

21 % of Germans in 2005 had a university degree. The OECD average of tertiary education graduates is 35% (only in developed countries, I presume; OECD tables are only available through subscription, it seems), so Germany is actually far behind. Where do you get your figures from? 15% is far from the mark. (There may be some 3-year degrees hidden in the 35%, but not in the German 21%, I assure you.) Conservative magazines and liberal magazines in Germany alike are clamoring for more university students (mostly sciences and engineering, naturally).

My info may be outdated then. I'll have to check on that, thanks for the heads up.

And no, education does not just have to provide an economic return. It provides other kinds of returns too that are valuable in another sense.

I agree, but society really does not need that many intellectuals. What it needs is people capable of producing goods, in order to maintain a high standard of living.

[greysnow]

Where else can investment originate, if not savings?

In credit. There has to be some money creation all the time to cope with the rising productivity and material wealth, or we'd have a deflation. This money creation is mostly done through giving credit. If all investment originated in savings only, the total amount of money could never grow.

Pensions create a disincentive to save, and the bulk of savings of any household are for retirement. I don't see how separating the two is possible.

I don't know where you got this idea. Germany has a pension system and does not suffer from undersaving and underinvesting. If anything, there's too little consumption to keep the retail sector going because people save too much. In fact, pensioners voluntarily save a good deal of their pensions.

Then the way to go is look a solution for asset bubbles and crashes, rather than starving the economy of capital in the name of social security.

I thought these were just outliers in the normal cycle of boom and bust? I don't think that it's possible to avoid them altogether in capitalism.

College only confers useful workforce skills to people in high-level professional career tracks (doctors, engineers, accountants, et al). Many college students take liberal arts degrees which are fine intellectually, but confer no useful workforce skills and represent an economic drain on society, and the individual in question. By general rule, people who lack the intellectual capacity to go into math, science or high-level technical fields should refrain from wasting time in college and instead learn a skilled trade, which would be more economically useful.

Only in a platonic state is education only about what is useful for society.
People who attend college will also hopefully be better informed citizens. That is useful for society.

But anyway, I may add that normally it's not people with a college or university degree that end up unemployed nowadays. In Germany (sorry, the number is from 2003, that was all I could find in a hurry, but I don't think the picture has changed that much) academics (all branches) suffered from 4.1% unemployment, contrasted with 9.8% across the whole population.

A large percentage of the non-scientific/non-engineering academics study law or economics. Does that count as high-level technical or as useless?

I agree, but society really does not need that many intellectuals. What it needs is people capable of producing goods, in order to maintain a high standard of living.

Orienting education predominantly to a high standard of living, while denying capable people the chance to improve themselves intellectually, is one-sided and creates a shallow materialistic society.

I would have no problem with everyone having to learn a trade first before being able to attend college or university, though. Why not have the best of both worlds.

[Dr House]

In credit.

Credit originates from savings.

There has to be some money creation all the time to cope with the rising productivity and material wealth, or we'd have a deflation. This money creation is mostly done through giving credit. If all investment originated in savings only, the total amount of money could never grow.

Money can also be printed out and simply dropped into the economy, or directly spent into existence as infrastructure projects, etc. I would prefer so in fact, given that bank credit expansion is used most of all to purchase asset classes, bidding up their price and encouraging unproductive speculation in lieu of fixed capital investment. Further, there is a limit to how much you can expand the currency before inflation becomes excessive, which means there is a limit to how much capital can be procured this way.

I don't know where you got this idea. Germany has a pension system and does not suffer from undersaving and underinvesting. If anything, there's too little consumption to keep the retail sector going because people save too much.

Retail is a very low-value economic activity, and should not be taken into much consideration when deciding how to best stimulate the economy. The proper focus of economic policy should be to stimulate capital-intensive production for export, at which Germany excels being itself one of the three largest surplus nations.

Germany has a household savings rate of 12.7%, and an adjusted gross savings rate of 21%. While this is much higher than the US and quite impressive for a nation with a comprehensive cradle-to-grave welfare system, it is nonetheless not enough to maintain an adequate fixed capital investment rate, particularly in sectors that are not fed by domestic consumer demand.

I thought these were just outliers in the normal cycle of boom and bust? I don't think that it's possible to avoid them altogether in capitalism.

Booms and busts are not cyclical and not inevitable. Economic crashes usually originate in the banking sector and radiate into the rest of the economy.

A large percentage of the non-scientific/non-engineering academics study law or economics. Does that count as high-level technical or as useless?

Modern economics is a propaganda outfit, which creates net damage to society. Lawyers are of course high-level professionals, but nonetheless it isn't a degree that should be encouraged.

Orienting education predominantly to a high standard of living, while denying capable people the chance to improve themselves intellectually, is one-sided and creates a shallow materialistic society.

I would suggest stronger and more vibrant families and communities would be much more fulfilling for normal people than intellectual development, given common people are not very intellectual. For the intellectually minded self-development is in my opinion a better option. I for one am self-taught and dislike university. Further, my ultimate goal is to maximize economic productivity in order to increase leisure time, to better allow people to pursue their own passions and self-expression.

I would have no problem with everyone having to learn a trade first before being able to attend college or university, though.

I can agree to this.

[greysnow]

Doctor, I'm afraid you'll have to wait a week or so for my reply. Feeling like shit this morning, going on vacation tomorrow.

[Dr House]

Have fun. Tell me about it when you get back.

[DanDaMan]

Credit originates from savings.

Credit, today, originates from paying ones bill.
Savings, today, is more like collateral. Spend it and you have no credit if you earned no credibility to pay.

[greysnow]

Have fun. Tell me about it when you get back.

I was on a LARP, a Cthulhu-mythos live action role-playing game set right here in Berlin where I played an English police inspector on an intern program. It was great -- adrenalin-packed and complex (almost too complex, it was bordering on the confusing in part). The outcome was undecided -- neither the bad cultists nor the good world-savers won, so the world as we know it remains in existence, though maybe just for the time being.

Credit originates from savings.

Not just. Or the total amount of money could never grow. Interest, as I understand it, represents future yields of an investment. As the economy grows, the yields become bigger, and credits are payed back with interest. To make that possible, you have to raise the total amount of money along with a growth in production, or deflation would ensue, as everyone would try to pay more and more interest with the same amount of money available.

Money can also be printed out and simply dropped into the economy, or directly spent into existence as infrastructure projects, etc.

This has led to disastrous bouts of money printing and associated inflation in the past, and this is the main argument why I would give control of the currency to a central bank and remove it from the state.

I would prefer so in fact, given that bank credit expansion is used most of all to purchase asset classes, bidding up their price and encouraging unproductive speculation in lieu of fixed capital investment.

Please give a me a concrete example; I'm none too familiar with English economists' jargon. What is an asset class?

Further, there is a limit to how much you can expand the currency before inflation becomes excessive, which means there is a limit to how much capital can be procured this way.

Ideally the currency is expanded at about the same rate as the GDP grows. As far as I know, the main danger of inflation happening is when the money supply grows faster than the sum total of non-monetary material wealth, production, and services rendered (labor). As long as the currency is not expanded beyond GDP growth, we should be safe.

Retail is a very low-value economic activity, and should not be taken into much consideration when deciding how to best stimulate the economy.

It's labor-intensive, and many jobs are lost if the retail sector suffers. I'd always take that into consideration if I want to keep unemployment low.

Germany has a household savings rate of 12.7%, and an adjusted gross savings rate of 21%. While this is much higher than the US and quite impressive for a nation with a comprehensive cradle-to-grave welfare system, it is nonetheless not enough to maintain an adequate fixed capital investment rate, particularly in sectors that are not fed by domestic consumer demand.

Saving is just a form of investment. Why would it hurt the economy if my money is invested directly and not carried to a bank account or a fund first? More money is spent but it ends up in the hands of the producers of goods and services, who reinvest it immediately without needing credit. The money is not lost, you know. In fact, the only way money could get lost is if you hide it in a mattress or burn cash.

Booms and busts are not cyclical and not inevitable. Economic crashes usually originate in the banking sector and radiate into the rest of the economy.

My English, sorry. Replace bust with "recession". Then it is a natural cycle, no? Was Keynes wrong?

Modern economics is a propaganda outfit, which creates net damage to society.

According to my left-Keynesian friend (an economics doctor) you are right in this at least, though probably for different reasons.

Lawyers are of course high-level professionals, but nonetheless it isn't a degree that should be encouraged.

Got fucked by one?

I would suggest stronger and more vibrant families and communities would be much more fulfilling for normal people than intellectual development, given common people are not very intellectual.

Well, I don't want to force them to go to university of course, but I'd like to give them the option should "common people" (what is that? Are you uncommon?) discover that they are intellectual enough after all. I don't know why you bring up families. I should think that family life and learning fulfill different personal needs and that one cannot replace the other.

For the intellectually minded self-development is in my opinion a better option. I for one am self-taught and dislike university.

I loved it. Also, autodidactic learning can lead to you learning a lot of outdated, useless and wrong shit.

Further, my ultimate goal is to maximize economic productivity in order to increase leisure time, to better allow people to pursue their own passions and self-expression.

We're already there a bit, which is why such a lot of people can afford to study liberal arts without us all going naked and hungry.

[hannigaholic]

Here in America, the dems are opposed to replacing all or part of our income taxes with any type of consumption tax while the idea is mainly supported by conservative; however, most of Europe employs a value-added tax, with, I believe, France having the highest rate at 25%?

Since we're lucky enough to have every-day liberals from Europe and America, I'd be interested in hearing your view points on the subject...

VAT is so open to abuse it's disgusting. Importing, say, running shoes through offshore tax havens (like the Cayman Islands or the Isle of Man) allows businesses to import the shoe (that cost, say, £1 to make) for £40 from an intermediary company that they own, then sell it for £50. They then only pay VAT on the £10, instead of the £49. A flat sales tax would close that particular loophole.

I prefer sales-based taxes to income-bases taxes, because it seems more appropriate to me that, if you're going to tax economic activity, people should not be taxed on potential activitiy (income), but on actual activity (spending). Sales taxes should also not apply to food, non-alcoholic drink, clothing, fuel, or housing, so as to redress the regressive nature of the tax.

but taxing land would be far superior, for a number of reasons - not least of which is taxes on economic activity act as a disincentive to that activity.

[Dr House]

I was on a LARP, a Cthulhu-mythos live action role-playing game set right here in Berlin where I played an English police inspector on an intern program. It was great -- adrenalin-packed and complex (almost too complex, it was bordering on the confusing in part). The outcome was undecided -- neither the bad cultists nor the good world-savers won, so the world as we know it remains in existence, though maybe just for the time being.

Awesome. sounds like a great time.

Not just. Or the total amount of money could never grow. Interest, as I understand it, represents future yields of an investment. As the economy grows, the yields become bigger, and credits are payed back with interest. To make that possible, you have to raise the total amount of money along with a growth in production, or deflation would ensue, as everyone would try to pay more and more interest with the same amount of money available.

Well first off monetary expansion through credit could be considered a form of forced savings, as it essentially adds funds to bank balance sheets and then causes demand to recede through inflation. Second, the growth of the monetary supply can nonetheless be controlled, such as by fixing it to a commodity (note: not necessarily saying that's desirable, only that it can be done).

This has led to disastrous bouts of money printing and associated inflation in the past, and this is the main argument why I would give control of the currency to a central bank and remove it from the state.

If you can't trust the government with the money supply you can't trust a central bank either, as central banks are controlled by the government anyway. Of course, money supply growth needs to be tightly controlled.

Please give a me a concrete example; I'm none too familiar with English economists' jargon. What is an asset class?

An asset class is a type of asset, e.g. stocks, bonds, company paper, derivatives, and so on, and so forth. As for an example, I could easily point you to the dot-com boom. Investment banks started buying up dot-com companies that reported no income and had questionable business models, their stock prices skyrocketed, everyone jumped in and people who got out before the bubble burst made a lot of money.

That's a rather extreme example, but that's what the American economy is mostly based on since the seventies: Investment banks get funny money from the Fed, they buy up capital assets (mostly in consumer debt), those assets rise in price and people make a profit off that without it actually being invested in any fixed capital.

Ideally the currency is expanded at about the same rate as the GDP grows. As far as I know, the main danger of inflation happening is when the money supply grows faster than the sum total of non-monetary material wealth, production, and services rendered (labor). As long as the currency is not expanded beyond GDP growth, we should be safe.

That's Friedman's monetary rule, and I have long advocated that (I prefer the helicopter drop method however, given the dangers with letting banks having that money first). It still yields a gross savings rate of only 4% a year, which is nowhere near enough to sustain the economy. More saving is needed.

It's labor-intensive, and many jobs are lost if the retail sector suffers. I'd always take that into consideration if I want to keep unemployment low.

All things equal, I prefer creating a more capital-intensive production job over a labor-intensive retail one. Labor-intensive activities are a good stopgap to a sufficiently large capital-rich economy, but not an adequate substitute of it.

Saving is just a form of investment. Why would it hurt the economy if my money is invested directly and not carried to a bank account or a fund first? More money is spent but it ends up in the hands of the producers of goods and services, who reinvest it immediately without needing credit. The money is not lost, you know. In fact, the only way money could get lost is if you hide it in a mattress or burn cash.

1) Direct investments can be conflated with savings. Large personal investments require saving anyway, unless you're a millionaire in which case you have all the savings you require.

2) Consumer spending feeds retail enterprises, which causes a net economic loss to the domestic economy if the retailer in question imports its goods or materials. Zero household savings would require either for the entire economy to be internalized (which is near-impossible for medium-size and small nations and inefficient for large ones), or for it to run a chronic consumer goods deficit (which would inevitably lead to national bankruptcy).

3) Leveraged investment allows companies to maximize scale, by magnifying the purchasing power of their own operating income, which means savings yields more positive feedback effects to the supply side than consumption.

My English, sorry.

It's ok. I do have a tendency to overuse jargon when I debate economics, I'll try to cut back.

Replace bust with "recession". Then it is a natural cycle, no?

Yeah, but I wouldn't say there's anything natural (or for that matter cyclical) about the business cycle.

Was Keynes wrong?

Yes, Keynes was very wrong. Keynes predicted general gluts (underconsumption) due to excessive saving were to blame for recessions and depressions, which is bullshit because gluts are far too expensive to maintain for any company to actually be wiped out by them, let alone the entire economy. Worse, Keynes' analysis doesn't apply at all to any economy which isn't self-contained.

Further, history doesn't agree with him. An examination of American recessions yields the conclusion that they all originated from one or multiple bank failures, which then caused other manufacturing companies to go bankrupt.

Got fucked by one?

No, but they waste resources, fuck people over on a regular basis and destroy companies.

We're already there a bit, which is why such a lot of people can afford to study liberal arts without us all going naked and hungry.

Yeah the problem is that Americans are on the verge of going naked and hungry for it. There aren't enough skilled production workers active or in training to support even America's greatly reduced manufacturing sector, because average people are studying poli-sci and history instead.

[greysnow]

Well, House, are you officially gone or not? (You may reply by PM.) If you are, I will send you my response by PM and leave the honor of the last on-topic contribution (and thus, for any reader, the legitimate suspicion that I have nothing more to say in defense of my position) in this thread to you. If you have decided to linger on for a bit, I'll come back to you in public.

[Zerogouki]

If you can't trust the government with the money supply you can't trust a central bank either, as central banks are controlled by the government anyway.

No, you have it backward: governments are controlled by the central bank :)

[greysnow]

Well first off monetary expansion through credit could be considered a form of forced savings, as it essentially adds funds to bank balance sheets and then causes demand to recede through inflation.

Now how can that be called "saving"? Just because it adds money to the same side of the bank's balance?

Second, the growth of the monetary supply can nonetheless be controlled, such as by fixing it to a commodity (note: not necessarily saying that's desirable, only that it can be done).

Why not fixing growth of monetary supply simply to the demand for higher money supply within the same mechanism?

If you can't trust the government with the money supply you can't trust a central bank either, as central banks are controlled by the government anyway. Of course, money supply growth needs to be tightly controlled.

The European Central Bank, just as the German Bundesbank before it, is by law free from any government intervention and set monetary policy on its own within certain parameters.

An asset class is a type of asset, e.g. stocks, bonds, company paper, derivatives, and so on, and so forth. As for an example, I could easily point you to the dot-com boom. Investment banks started buying up dot-com companies that reported no income and had questionable business models, their stock prices skyrocketed, everyone jumped in and people who got out before the bubble burst made a lot of money.

I see, thanks.

That's Friedman's monetary rule, and I have long advocated that (I prefer the helicopter drop method however, given the dangers with letting banks having that money first). It still yields a gross savings rate of only 4% a year, which is nowhere near enough to sustain the economy. More saving is needed.

I still do not understand why. We have established that saving is not a necessary condition for credit, as credit can be a function of the growth of the money supply. We have also seen that money is not lost when it isn't saved but spent, and that the more is spent, producers can finance investments directly without even needing credit. I'm getting suspicious that your true reason is not an economic, but an ideological one, as you hope to avoid a welfare system by your system of forced saving (which can never provide for people who never had an opportunity to save anything). I certainly don't see the economic sense.

All things equal, I prefer creating a more capital-intensive production job over a labor-intensive retail one. Labor-intensive activities are a good stopgap to a sufficiently large capital-rich economy, but not an adequate substitute of it.

Well, as long as income is largely bound to labor, my first aim is to provide jobs. I'm fine with alimenting people by welfare, though, if they are not needed, but in the opinion of most people this seems not to be desirable, so as a good politician I would aim to create as many jobs as I could.

1) Direct investments can be conflated with savings. Large personal investments require saving anyway, unless you're a millionaire in which case you have all the savings you require.

So, it's all the same as long as the money stays in circulation, right? Because money saved on a bank account stays in circulation; the bank will see to that, and it is in fact the only way that interest can be realized. So if interest, aka GDP growth, can only be realized by circulating money, the method of circulation should not be important -- whether I circulate it myself or the bank does it for me with the money on my savings account, doesn't matter.

2) Consumer spending feeds retail enterprises, which causes a net economic loss to the domestic economy if the retailer in question imports its goods or materials. Zero household savings would require either for the entire economy to be internalized (which is near-impossible for medium-size and small nations and inefficient for large ones), or for it to run a chronic consumer goods deficit (which would inevitably lead to national bankruptcy).

The trade balance just has to be, well, balanced, that's all, no? That is, if you can't achieve autarky, see that you export as much as you import.

What does forced saving have to do with the trade balance?

3) Leveraged investment allows companies to maximize scale, by magnifying the purchasing power of their own operating income, which means savings yields more positive feedback effects to the supply side than consumption.

Translation, please? You sound like a PowerPoint bullshitting session become flesh.

Yes, Keynes was very wrong. Keynes predicted general gluts (underconsumption) due to excessive saving were to blame for recessions and depressions, which is bullshit because gluts are far too expensive to maintain for any company to actually be wiped out by them, let alone the entire economy. Worse, Keynes' analysis doesn't apply at all to any economy which isn't self-contained.

Further, history doesn't agree with him. An examination of American recessions yields the conclusion that they all originated from one or multiple bank failures, which then caused other manufacturing companies to go bankrupt.

Well, I'll try to keep that in mind and confront my friend the Keynesian with it. I'm not an economist, so I can't really protest your assessment on my own.

No, but they waste resources, fuck people over on a regular basis and destroy companies.

Unfortunately, they're necessary, as the law is so complicated (and has to be so complicated in a complicated society). American lawyers seem especially gluttonous, though.