The Anglo-Saxon world seems worried, at last. For more than a decade savings have become an unfashionable economic idea in the West. More so in the Anglo-Saxon economies led by the US, which set the standard for the rest of the West, and the rest of the world.

Americans now save hardly one per cent of their post-tax income. This too is a statistical myth. Only Hispanics and Asians in the US save. The American Americans are actually in debt on credit cards for some $2 trillion. The Kangaroos and Kiwis are savings-negative. Some 25 years ago, Americans saved 15 percent of their income, 7 percent some 15 years ago. Now thrift has become outdated in the US.

Many experts now bemoan "the drift away from thrift". How did savings, a precious idea, turn into an economic ridicule?

This happened by a complex evolution. First, traditional families that cultivated the discipline to save were disrupted by cultural degeneration. Second, US companies forced the Government into cheap money policy. This forced down bank deposit rates that made saving unattractive. Families bid good-bye to savings. Result, the State had to increase social security handouts to people. Hyped corporate selling made consumption popular, turning moderate living into something antiquated. Tax and interest policies promoted consumer spending, not savings, as the chief economic driver. Low bank interest drove people to risk-bearing equity market. Simultaneously, corporate stocks skyrocketed by high consumer spend. This was celebrated as generating risk capital to business and personal wealth to investors. But that wealth was more notional than actual.

Why save when stock markets give huge unearned wealth, the experts counselled. But where to get money for spend and equity? The answer went thus: "See these Asians are (foolishly) saving so much that they have no alternative except to lend it to the West; wisely get and keep invested their savings in our stocks, treasury bonds at cheap returns. In short, make them save and you spend or invest."

So, a new specialisation emerged in global economics: Asians specialising in savings and the English-speaking West specialising in spending! Moodys and S&P favoured them with ratings that got the West loans at low interest from the Asian savers. The West spent it merrily, even invested it back in the savers' economies as FDI for high returns! Our loans to them were recycled back as their FDI to us! Yet, they ridiculed the Asian economies as 'bank-dominated'; so 'backward in capital market systems'.

They glorified the 'sophisticated' stock markets of the West, which made it possible for people to do with less or no savings. On the new logic, savings came to symbolise underdevelopment! And borrowing, the developed rich! Thus, economics was stood on its head. But it worked. Japanese, Chinese, Indians, Koreans and Taiwanese sank trillions of Dollars of their savings in the West at some two per cent interest!

This trend to squander never bothered the West, until recently. But, with Islamic terror striking at its confidence and stock markets fumbling, the West now seems to be rethinking. Many, like ace investor Warren Buffet, have begun doubting the borrowing model of economy.

A recent report in the 'Economist' magazine (April 4, 2005) on 'The Economics of Saving' is revealing. For the first time, it talks about the economics of not saving. How long can the West go on borrowing and spending, it asks. It notes that relying on "the unfulfillable pension plans of bankrupt Governments" and on the "absurdly rosy assumptions about capital gains from stocks and houses" the people are saving less. It urges Anglo-Saxon countries and the US to save more. It tells the Government to save, not the people. It theorises that both do not save together. So, only one of them needs to save! But, it says "that does not mean private savings are irrelevant" and "higher private savings will help raise national savings".

These convolutions testify to the dilemma - whether to save or not to save; and who should do the hard job of saving, the State or the people. Most experts would not advise raising the interest rate to attract the people to save. Why? Fear of a chain reaction setting in: reduced consumption spend, consumer demand and business for US corporates. So, cheap money that drove the market has now proved a costly exercise. So, the Economist calls for a return to "more realistic interest rates to boost savings".

Even cites the compulsory pension contribution in Australia! But, it concedes, savings will not go up forthwith. The US and the West seem keen to drift back to thrift.

What does this threat 'back to saving' mean to the Rest? Cheap money pulls American consumers to the Walmarts and keeps factories in China and elsewhere working overtime. It drives the US and global economy. The end of cheap money will slow this drive. It will hit our stock market. Being highly dependent on Foreign Institutional Investors (FIIs), not Indian nationals, the FIIs now decide its fate. If the US raises interest rates, FII funds will partly migrate to the West. That will force down the Sensex. But, there is still a silver lining.

An interest rate hike in the West will re-open profitable investment space in India for our relatively high cost capital. The Indian capital is less investment-friendly in competition with foreign equity. This forces Indian business to prefer cheap foreign capital over the costly Indian. So, it may be a blessing in disguise for us if the US raises its interest rate. But, will our experts look at it this way, or begin to cry?