Does government spending increase your savings?
Government spending is usually detrimental to savings. A person earns a certain income. This income is spent on (1) necessary subsistence like food and shelter, (2) luxury items like an upgrade in food and shelter, transportation, entertainment, etc. and (3) savings set aside for the future. Some will quibble on the definition of luxury items because some luxuries are necessary to attract the opposite sex and may be termed necessities. The breakdown is malleable from person to person and over time. Some people will prioritize (horrible word) on savings over luxury. As income is reduced, the person sets priorities on spending. The first to go in most cases is savings. The second to go is luxury items. The third is subsistence. You gotta’ eat! Taxation is the income coerced by force from the individual to pay for government services. (There are other types of taxes.) Taxes are taken from income regardless of how the remainder is spent. The person will then embark on their priorities as though their income has been reduced. The first thing that suffers from reduced income is usually savings.If the tax burden is increased, then luxuries may be impacted. Even larger taxes impact subsistence spending. Remember, taxation is coerced by the state. The government spends the tax proceeds according to the wants and desires of people within the government (the King, the Emperor or Congress). The motivation of these people never coincides with the motivation of the taxpayer. The taxes never replace the items that the individual would have purchased and the value spent is always lower than the amount taxed. This is because of the bureaucracy necessary to administer the collection, movement and expenditure of the taxes. Government spending in excess of tax revenue (deficit spending) generally causes inflation. Inflation impacts income more the longer the person holds onto the income. Savings are impacted the most because the income is saved so inflation acts on it over a longer time and reduces interest income. Inflation also reduces the value of the money the government uses to pay back its debt form borrowing. In conclusion, Government spending decreases the opportunity to save and decreases the worth of whatever savings you have.
How does the U.S. national debt affect most American citizens?
Useful graph at the beginning of this article Page on gfmag.com Quick statement, US (all) governments debt has risen from 86% GDP pre-2008 crisis to 114% now. For comparison, Canada is now at 86%, Greece is at 200%. Two problems in US are 1) the current federal budget is in serious deficit, 4% of GDP per year, with no plan in place to reduce that. By comparison, Canada's federal budget is at 2.8% of GDP with a plan in place to have the budget balanced by 2015 or 16. 2) There appears to be no likelihood of a plan being implemented anytime soon to get the budget to balance. Canada's governments collect about 37.7% of GDP in taxes, the USA about 22% (CIA Factbook) The World Factbook . (These figures are highly suspect. Other sources such as Heritage Fund place those two figures at 32.2% and 26.9% resp. I believe CIA figures for USA ignore state and local taxes List of countries by tax revenue as percentage of GDP ). Points to make. USA total tax burden is so much lower than in any other developed country (nearest is Canada, EU countries typically Portugal 37%, UK 39%, Germany 40.6%, France 44.6%, Norway 46.3%) If USA brought its tax burden up to even just below its next nearest competitor Canada at 32%, even if only until the debt was back down to a safe level, say around 50% GDP, then dropped it back to where the budget balanced, there would be no more concern from international lenders. This would clearly be a move to bring things back into rational balance, and should be promoted to voters as a necessary emergency measure.There is clearly not enough waste in any US governments to re-balance the deficit and reduce the debt to a safe level. Not even any tea-party candidate has proposed any cut which could do that. A large majority of US voters appear to want to keep the US military system funded as it is. So there is really no other option. Either increase taxes to cover expenses, or continue down this rabbit hole.
What is the relationship between saving and investment?
To understand that, you have also to understand the relationship of these concepts with consumption.So consumption represents the final use of a good or service, in other words, consumption means that the resources allocated for that purpose are not allocated anywhere else (“Consumption is destruction” Karl Marx).Saving is a process by which you are not using all the resources to which you have a claim to, meaning that they can now be used to other purposes like investments.When consumers make the decision to save, what they are doing is to make a decision of postponing consumption, because they value consumption in the future versus the present. By putting their savings into a bank, this will increase the supply of money available, meaning that the price of borrowing it will be lower, i.e, interest rates will be lower. And this is where the inter-temporal function of interest rates come into play. By saving now, consumers are saying that that want to consume in the future, through the price (of money) mechanism. Now since managers and entrepreneurs are interest rate sensitive, when interest rates decline, they see this as an opportunity to start investing in long term investment projects.The story is that when finally consumers use up their savings, these investment projects have already been made and can be used to satisfy consumer needs.You can look at it from two perspectives, (1) the real economy, whereby you use actual goods and services, and (2) and the money part of the story.All-in-all savings represent those resources that are not consumed, and can therefor be used in investment projects.
Tips for a beginner to establish good credit?
The best way for a person to start on the road to good credit is to get a credit card. Get a card that does not have a yearly fee or anything you have to pay just to have the card. If possible, get a card that will earn you something with your spending (such as the Borders card that earns you points toward gift certificates). Once you get the card, make a purchase. Perhaps, use the card to pay your monthly costs (such as groceries, gas, etc.). Then, pay the balance at the end of the month. Make sure to pay your bill on time every single month (Most cards offer auto-payments that you can set up. I find this works the best for me, so I never have to worry about late fees). Don't let yourself get carried away and buy more things on the card than you could possibly pay off, however having a balance over a few months, instead of paying it off every month, can be a good thing for your credit. Just make sure you pay it on time, don't get late fees, don't go over your balance, and don't spend more than you can afford. If you do this, the card will build you good credit within 6-12 months, maybe less. The only other thing that I can suggest is going to your bank and asking them to give you a small personal loan to help you build credit. They often will give people secured loans, so they can help. A secured loan, in a nutshell, would mean that you would open an account for them for the amount you are borrowing, and then pay the loan off month by month. That way, they know the money is there, in case you didn't pay them, but you are getting credit (no pun intended) for paying off a monthly personal loan. You can always try both of these, but the credit card is the easiest way to go. I am glad to hear that you are trying to get good credit set up from the opening gate. I wish there had been someone to guide me when I was starting out! Good credit will open doors for you throughout your entire life. Bad credit will hinder you at every turn, and it takes a lifetime to fix. Good luck to you! I hope you can get fabulous credit. If you get a credit card though, just make sure you get ONE. A lot of people accept all the offers they get, and they get themselves in LOTS of trouble. Good luck!