1) Great thread. Many economists and economic commentators have a very hard time understanding how systemic constraints work. They assume that the collective is nothing more than the sum of millions of individual decisions freely arrived at, when in fact those decisions are... https://twitter.com/AtifRMian/status/1287122422274174976

2) collectively constrained by adjustments in the system that force a certain outcome. That is why everyone’s “individual” decision ends up being collectively whatever it takes to get the systemic constraints to resolve. As Atif points out here, Pakistan’s low savings isn’t...

3) the consequence of the independent decisions of millions of Pakistanis foolishly to spend all they earn. In the relatively closed agricultural system in Pakistan, if investment is constrained, then so are total savings, so that if farmers cut back on consumption to save...

4) more individually, rather than a rise in savings there could easily be a fall in income, with the result being that collectively there can be no increase in savings.

The same is true – for very different reasons – in the US. By definition the US savings rate must equal US...

5) investment minus the current account deficit, so that if capital inflows do not result in higher investment, they must result in lower savings. A lot of commentators find this impossible to understand because they are convinced that the US savings rate is completely free of...

6) external constraints and must represent the expression of the typical American, so that if it is low it must be because the typical American doesn’t like to save.

This is nonsense. It is low because the combination of low investment growth and a high current account...

7) deficit forces changes in the US economy – shifts in income, for example, or in the structure of the financial markets – that compel individual Americans to decide “freely” to reduce their savings collectively (even as soaring income inequality drives up savings in some...

8) sectors). The point is that some American entities “choose” to save more and others less, and income will be shifted among them until the necessary savings outcome is reached.

Systems must balance. We are individually free to do whatever we want, but only to the extent...

9) that collectively we fit within our systemic constraints, and conditions will shift to force us to make our collective decisions fit the need of the system to balance. This may be emotionally hard to accept for many people, but it cannot possibly be otherwise – unless you...

10) think there is powerful deity out there whose job it is to arrange the astonishing series of coincidences that allow us each to be totally free of constraints while still always keeping everything in balance.