Sunday, March 05, 2006
American Savings Rate
Earlier it was announced that American had a negative savings rate for the first time since the great depression. You can spot this announcement by looking at the mortgage rate charts - notice the sharp spike up?
I am not defending the savings rate. It does need to improve, but this just came out in the Associated Press and should be noted.
Some economists say that's far-fetched. They argue the personal savings figures are artificially low, since the numbers don't include increases in assets such as equities and homes. Yale University economics professor William D. Nordhaus made that argument in 2002 congressional testimony, saying that once assets were included, the savings rate for the 1990s would have been a robust 25 percent.
European countries count capital gains and home appreciation when they calculate personal savings, said William Hummer, chief economist at Wayne Hummer Investments.
"Our savings rate is understated," he said. "I think it's wrong."
I am not defending the savings rate. It does need to improve, but this just came out in the Associated Press and should be noted.
Some economists say that's far-fetched. They argue the personal savings figures are artificially low, since the numbers don't include increases in assets such as equities and homes. Yale University economics professor William D. Nordhaus made that argument in 2002 congressional testimony, saying that once assets were included, the savings rate for the 1990s would have been a robust 25 percent.
European countries count capital gains and home appreciation when they calculate personal savings, said William Hummer, chief economist at Wayne Hummer Investments.
"Our savings rate is understated," he said. "I think it's wrong."
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