>In their NLR aricle from sep/oct 98 (available at
>http://www.igc.apc.org/globalpolicy/socecon/global/newleft.htm) Robert
>Wade and Frank Veneroso say "the US has the lowest aggregate savings rate
>among the OECD countries....It needs foreign savings to sustain its
>consumption and investment. It also needs a high stock market for the same
>purpose."
>
>Doug, you often make the point that the stock market has little to do with
>investment so this need for a high stock market is tied to consumption,
>right? What's the connection exactly? Credit cards? Overconsumptionism?
Good question. I don't know what they had in mind. Could be that a high (and rising) market is necessary to keep the foreign money coming in, but who knows? Or maybe a high (and rising) market is meant to offset low savings rates so that people can have the illusion of saving for retirement. But if too many people start withdrawing their funds, then the stock market will be low (and falling).
Doug