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Title: Role of saving and investing in helping the overall economy

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Title: Role of saving and investing in helping the overall economy

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Completed by Brendon Walker
Durham College

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This page is a summary of some research I have done for a Money Management course at Durham College. The research is attempting to identify how savings and investing help the economy.

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http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/indi02a-eng.htm
The link to this page shows you a list of Economic indicators. Economic indicators are defined statistics that indicate the direction of an economy. Here on this page we see Household disposable Income, which is the money you have leftover after necessary expenditures, which in other words is savings. You also have Business investment as another category in this table. Given that this is an official government website we can see that savings and investment are considered when measuring the economy. It makes sense that both of these items would be helpful towards an economy. Higher savings gives people more disposable income to go towards investments. Investments help businesses create more jobs, which in turn helps the economy.

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http://taxfreesaving.ca/"Reducing taxes on savings promotes investment jobs and economic growth." This is a quote from the page that refers to the  budget for the federal government of Canada when they were first introducing the TFSA.
I think there is no plainer way to put it as this is how both saving and investing help our economy. TFSA are perfect for Canadians and for the Economy because they allow us to save our money and benefit from investments or higher savings rates tax free. This website contains all the information you need on how a TFSA will work and how it can benefit you.

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https://www.theglobeandmail.com/report-on-business/economy/economy-lab/canadians-should-welcome-more-foreign-investment/article620436/
This article cites sources like OECD(Organisation for Economic Co-operation and Development), Stats Canada, and Invest in Canada. Information within this article indicates that foreign investments in Canada worth $100 billion from 2008-2011 have created many jobs which pay well.
I think that even though the investment is foreign, it is good evidence that when we invest in capital goods, such as the ones mentioned in the article. We see that investing increases the amount of productivity that happens which leads to further growth down the road. It shows that domestically as well, if we can increase our savings, then we can increase the pool of funds available to us to make good investments when opportunities arrive.

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https://www.youtube.com/watch?v=Q3QmjqFrWIk
This is a video about consumer debt, and how it poses a threat to our economy. Since consumer debt means increased spending, but only on debt, it is the opposite of investing and saving money. In this case we see that it can affect our economy in many ways. First as I was interested to learn in the video, increased debt leads to decreased consumption of exports, which also effects the economies of other countries. This can have an impact on foreign investment into canada and negotiation of trade deals. Another way that consumer debt is bad for our economy is that it equates to less savings domestically which means less domestic investment and consumption as well. All of this leads to decreased consumption of goods and a decrease in the demand for labor, which can have a ripple effect.

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Why Consumer Debt is Canada's Greatest Economic Risk

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Mar.15 -- Bloomberg's Michael McKee and Citigroup North America economist Dana Peterson discuss Canada's economy and progress in the latest round of Nafta negotiations. They speak with Bloomberg's Alix Steel on "Bloomberg Daybreak: Americas."

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https://www.youtube.com/watch?v=d67D-jSt9N4
This video points out factors that are posing risks to the Canadian economy which could point to trouble in the future. The risks identified in this video are shrinking oil and manufacturing sectors leading to lack of stable jobs as well as increasing household debt. I chose this because I think savings and investment are correlated to this. With less job growth brings less income, which means more debt and less disposable income, which means no savings.  When savings are low because of these resons, consumer spending and investing goes down which hurts the economy

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https://www.youtube.com/watch?v=O6y6SfyYhI8
This is a short and sweet video, but it explains perfectly how savings and investment are important for the economy. In this video it explains that one way savings helps the economy grow is by providing banks more capital. If more Canadians increase their savings accounts then this means that their money will be in the bank, which can be used by the bank to support more investments which is good for the economy. More investments bring about technological growth and more opportunity for labor providing more income and lower unemployment to people, which in turn will increase consumption of goods and services. One interesting fact in this video is how Japan and Germany had higher savings rates than America after WW2, which led to them catching up to Americas economy.

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http://www.macleans.ca/economy/economicanalysis/the-most-important-charts-for-the-canadian-economy-in-2016/
This image is a chart representing Capital spending in Canada from both private and public sectors. What I think is interesting about it is the difference in private vs public that happens at 2008, which we know is when there was a recession. This is a good representation of how low investments in the private sector is an indicator of a weak economy. It also shows that the government made a huge increase in investing into Canada on their own to encourage economic growth. One interesting fact from this page is that Canadian companies as of 2016 have $700 billion in idle liquid assets, that could be invested into our country in the future.

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1.

What did you learn about the topic that most surprised you?
I was most surprised by that fact that higher savings and more savings is actually good for the economy. I was under the impression that if people hoarded their money and did not spent it it was bad for economic growth because of lower consumption. However it makes sense that higher savings provides more capital for banks to loan money out for investments in business.

2.

Provide a real

-life example of how this topic is relevant or interesting

for you.
The most relevant information for me in this article is the information in the charts about how our consumer debt is rising while incomes are becoming stagnant. For me this is concerning because I wonder whats in store for our economy in the next 10 years. If we are propped up by foreign investment into real estate and we are not able to sustain ourselves from within are we headed for another recession in the near future? Unlike many in my generation I actually have savings and no debt... I am close to have enough for a down payment on a home, but I am reluctant to move out on my own because of how the cost of living is and how it would affect my ability to save.

3.Which research did

you find most interesting?  Why?
The most interesting research for me was learning about economic indicators. I feel like I understand economics a bit better now because of this. There are more indicators than just savings and investment, but as I am looking to start doing capital investing of my own in the near future, knowing about these economic indicators will give me a better perspective on markets and economy and when good times to hold, buy or sell are.

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http://www.canadianbusiness.com/economy/canadas-50-most-important-economic-charts-for-2016/
This image is reflective of how our economy is facing trouble in the coming years. As we can see in this chart, income for middle to lower groups has been stagnant for a long time and not increased while for the top 10% of the population it is steadily increasing. This is related to our economy, savings and investment, because these things are tied to our income. Right now it is bad for our economy that income level is shrinking for lower and middle class, this is contributing to our consumer debt, which means less personal savings and less domestic investment.

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http://www.collierscanada.com/en/news/2016/8-reasons-to-invest-in-canada-right-now
This image is an info graphic of what is driving foreign investment into our economy. I chose this because of the information about how our low dollar encourages foreign investment which is very good for our economy. According to the info graphic in 2015 Canada received 1.4 Billion dollars in foreign investment! This means 1.4 billion dollars flowed into our country due to investing which leads to job growth and increased consumer spending. It is interesting how much of the foreign investments end up being Toronto based.