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Battles between your present self and your future self are not fair. Your present self holds advantages and is always poised for victory. So says Daniel Goldstein in this illuminating Ted Talk . And Goldstein, Principal Research Scientist at Yahoo! Research , is working on developing some ways of making the battle more even. Because if we don't find ways of helping our future selves win, then we are setting ourselves up for financial struggle. (Spoiler alert: yes, this is about saving.)

Retailers in the US are relying on consumers spending and spending for the holidays, but the consumers that truly matter in the global economy are in China. The Chinese government has set consumption as a priority. This will require that Chinese consumers have more money and are confident in their family's economic situation. According to McKinsey's 2011 Annual Chinese Consumer Study , these conditions have been met. Take a look at the rise in confidence among Chinese consumers: The authors point out that spending will almost certainly rise along with that confidence. But sustained growth in consumption will depend more and more on Chinese consumers buying goods to replace products that they have bought in the past. This is behavior that we take for granted among consumers in developed economies like the US and Japan. But it is new ground in a lot of product sectors in China: A few categories, in particular big-ticket items such as cars, have significant growth potential through first-time buying. For example, China is the world’s largest auto market, with 11.7 million passenger cars sold in 2010 compared with 9.8 million in the United States. But the total number of cars sold per capita is 13 times smaller than in the United States, and most car buyers in China are still first-time buyers. Personal computers constitute another category still ripe for strong growth from first-time buyers. Ownership has risen sharply from 25 percent of urban households in 2006 to 44 percent today with much room for additional growth from new users. In poorer rural areas, only ten personal computers are shared among 100 households. As incomes continue to rise in China, and as the government’s consumption-boosting measures kick in, more and more people will be able to afford such items. For many categories that have been in China for more than ten years, however, and are widely affordable albeit at different price points, the headroom for growth from first-time buyers is limited. With the exception of very big-ticket and luxury items, as well as products that are relatively new to the Chinese such as breakfast cereals, many of the largest categories such as white goods, personal care, food and beverages, and apparel have now reached penetration levels of well over 50 percent of the urban population. This means that some categories may see falling growth rates. National sales of mobile handsets, for example, grew at around 7 percent a year between 2006 and 2010, compared with 21 percent during the previous five years, a reflection of the fact that 97 percent of urban households now own a mobile phone. In such cases, an essential component of capturing rising spending power will be to persuade consumers to buy more of the same thing—either by making more frequent purchases or buying in greater quantities—or to trade up to more expensive products in the same category. Refrigerators and washing machines serve as an example. Although over 90 percent of urban dwellers now own these items, the survey shows that the average time they keep either item before replacing it has dropped in the past two years from around seven years to six. In addition, the average amount spent has risen by 9 percent for refrigerators and 15 percent for washing machines. The survey again highlights how the importance of these other drivers of category growth differs both by category and region. Read the full report here .

Saving has come back in the US. After dropping to 1%, the saving rate is now close to 6%. In the latest Economic Letter from the Federal Reserve Bank of San Francisco , Reuven Glick and Kevin J. Lansing look at the relationship between the saving rate and availability of household credit. And they find a very strong correlation. To explain movements in the saving rate over time, we construct a simple empirical model that uses data from the first quarter of 1966 through the third quarter of 2010. We perform a regression, a statistical exercise in which we look at the relationship between the personal saving rate and two contemporaneous explanatory variables: the ratio of household net worth to disposable income, shown in Figure 1, and our constructed measure of credit availability, shown in Figure 3 (you can find Figures 1 and 3 here ). The first variable is based on the standard life-cycle model of net worth and saving. The second variable is intended to capture shifts in credit available to U.S. households that affect saving behavior outside the standard net worth channel. Figure 4 plots the actual saving rate versus the corresponding value fitted to the data from our empirical model incorporating credit availability. The model explains 90% of the variance of the saving rate since 1966. Both explanatory variables are statistically significant in helping explain movements in the saving rate. Rising net worth and easier credit availability both correlate with lower saving rates, which is consistent with the broad patterns shown in Figures 1 and 3. Similar results are obtained when we omit the credit availability variable but account for the separate influence of the household asset and debt ratios on the saving rate, rather than subtracting the two ratios to form a single net worth variable. This result reinforces the notion that changes in the household debt ratio tend to reflect changes in credit availability. For comparison, Figure 4 also plots the fitted value from a standard empirical model that employs the net worth ratio as the only explanatory variable. The standard model explains only 73% of the variance of the saving rate, considerably less than our empirical model that includes the credit availability variable. Moreover, the model incorporating credit availability does a much better job of reproducing movements in the saving rate that have occurred over the past 10 years, when lending industry changes have been particularly dramatic. Read Consumers and the Economy, Part I: Household Credit and Personal Saving here .

In the latest Financial Page column at The New Yorker , James Surowiecki takes a look at consumption in China. The worlds's most populous nation has developed a reputation for thrift to the extreme. He estimates that Chinese households and institutions sock away $2.5 trillion a year. And consumption is just 35% of GDP--"significantly lower than for most Asian countries and only half the rate in the United States," Surowiecki writes. But it hasn't always been this way in China: One common explanation for this thrift is that it’s the product of “Confucian values.” Yet China has not always been so thrifty—in the eighties, consumption was more than fifty per cent of G.D.P.—and today other “Confucian” countries consume far more than China does. The real source of China’s underconsumption is the way it manages its economy. Credit isn’t always that easy to come by. China’s policy of holding down the value of its currency means that consumer prices are higher than they would otherwise be, which obviously discourages spending. And, as a recent McKinsey Global Institute study points out, once you move beyond China’s biggest cities, there’s often a dearth of retail outlets and products for sale. Potential spenders are also held back by systemic issues. Paradoxically, in this still putatively Communist society, families for the most part have to fend for themselves. Health insurance is limited in what it covers and far from universal, so getting sick can be a costly proposition. Only a fraction of the workforce receives unemployment benefits, while pensions are underfunded and haphazardly administered. A scarcity of student loans and subsidies for higher education, meanwhile, means that paying for college requires hefty savings. The inadequacy of the social safety net forces the Chinese to engage in “precautionary savings,” buffering themselves against disaster. A recent Brookings Institution study attributes much of the increase in household savings to the rising cost of health care, together with that of housing and education. Read The Frugal Republic here .