I.O.U.S.A - Addison Wiggin [84]
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172 The
Interviews
Q: How important is it for kids to learn at a young age the importance of saving?
Alan Greenspan: Well, remember what savings is all about: essentially putting aside part of what you produce, part of your income, to have provision for the future. In other words, people don ’ t live only in the day that we ’ re talking about. We ’ re always projecting where we ’ re going to be next week, next month, next year; we ’ re always looking forward to what type of careers we ’ re going to have, what we ’ re going to learn, and how our lives are going to evolve. In other words, we don ’ t live in the present and cannot live in the present only. Human beings cannot survive unless they create provision for the future, and a goodly part of the provision for the future is in monetary terms, and terms in which one can see what one needs as the years go on.
If you broaden this idea to the economy as a whole, without preparing for the future, and making provisions, the economy will be stagnant. It will not be rising as the United States has over our whole history, generation upon generation. It ’ s critical — without savings, there is no future. It is critical to human beings, it ’ s critical to a nation, and it ’ s critical to the world at large.
Q: If there is a country that is choosing to live beyond its means, is there anything a central bank can to do to fi x that, ultimately?
Alan Greenspan: If there are signifi cant fi scal defi cits or basically a lack of savings in an economy, what that will do — leaving aside for the moment what the Federal Reserve does — is to raise interest rates, because a demand for funds exceeds the supply of funds and there ’ s nothing that one can do to prevent interest rates from rising. Now the danger is that if the Federal Reserve does not keep monetary policy tight in such an environment, and in a sense facilitate the rise in interest rates, it can do so only by expanding the money supply, ultimately creating infl ation, and infl ation eventually disables an economy and standards of living. So in that sense, if fi scal policy is lax or savings are exceptionally low, there is nothing monetary policy or any central bank can do about that.
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Dr. Alan Greenspan 173
All it can do is to try to protect the system from being excessively affected by what would be an irresponsible policy on the part of government.
Q: Would you add, too, that there might be some irresponsibility by individuals who choose not to save money in their own life, in their own families?
Alan Greenspan: Well, it ’ s always a very diffi cult problem to make judgments about what the motives of people are. If you ’ re in a free society, people have to choose the way they wish to live, the values they wish to implement, and it ’ s not up to government to tell them they act should differently, with the obvious exception of being acutely aware of what the nature of rights are and what the nature of laws are. But there ’ s very little government can do directly to affect people ’ s attitudes. That ’ s part of the culture.
That ’ s basically the function of society in general, of people who write books, people who think about issues, people who try to convince people about what they should and should not be doing. I ’ ve often found that one of the characteristics of a free society is that we are free to be irresponsible. I don ’ t like that fact, but the ability to do so is an essential freedom because unless you voluntarily do the right