Another good book to share. In any country, if the people never spend; the economy can’t expand. It happens in Philippines before and in Malaysia, it may happen if we keep on increasing our saving rate every month. Currently, I’m reading a book by Paul Krugman on “The Return of Depression Economics”, tells us the rising and downfall of great economy like Chile, Argentina, Mexico, Japan, Thailand and the rest of Asian countries. One of the reasons is, “high saving rate”. Surprising isn’t it? For more info log on: The-return-of-depression-economics-and-the-crisis-of-2008.
To avoid this to happen, the government will normally help the people to spend. How? By issuing more bonds or Government Trust Funds (ASM, ASW and AS1M), hoping the public will take their money out from FD and invest into government related funds. The government will then use this money to stimulate the economy by creating or subsidizing more projects; especially to those sectors that will have greater “multiplier” effect (so call). One may also argue that, if they start to “bail out” companies own by their families or issuing projects related to their crony, it will back to square one or worst. Well, according to Paul Krugman, it is subject to “moral hazard” (term use for corrupt leaders or politician). It’s all depends on how we uses a “knife”. It can be for good or otherwise.
Also read “To save or To Spend?” from The Star Online: The Real Matter, Pankaj Kumar. Happy reading and exploring.
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