Greece represents the triumph of spend and borrow over save and invest – only saving will save us

Now that we have learned all over again that we don’t know much in finance, we may as well come back to the little we do know and we have known for a long time with plenty of evidence to prove it. No individual, family, town, community or country can live for ever and get rich, or stay rich, on borrowing alone. Saving can only be postponed, but not avoided. Borrowing eventually needs to be repaid – call it enforced saving. The choice is not whether we save or not, but who ends up doing the extra saving. Because in the ultimate analysis, excessive borrowing only results in some people, the borrowers, getting a free ride when they get partially or totally bailed out and the rest of the people, the savers, losing part of their hard-earned savings to pay for the extra debt used for fleeting gratification through unaffordable consumption.

Every country needs to decide, democratically, what growth rate and consumption level are both affordable and sustainable for the long term. Because growth and consumption can only happen if there is effective and sufficient investment. The next decision is who is going to save to finance the necessary investment? Is it going to be the British people or the foreigners from whom the British people will subsequently borrow? We have already tried the foreign route and we have already seen what that has done to the Pound. If the Pound ais to remain as a store of value and future purchasing power we may want to try another route.

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