Mises Wire

Facebook icon
LinkedIn icon
Twitter icon
< | < | <

Your Grandfather's Saving Rate


The AP is reporting that the US saving rate was negative for all of 2005, something that hasn't happened for 70 years:

The savings rate has been negative for an entire year only twice before _ in 1932 and 1933 _ two years when the country was struggling to cope with the Great Depression, a time of massive business failures and job layoffs.
With employment growth strong now, analysts said that different factors are at play. Americans feel they can spend more, given that the value of their homes, the biggest asset for most families, has been rising sharply in recent years.
But analysts cautioned that this behavior was risky at a time when 78 million Americans are on the verge of retirement.
"Americans seem to have the feeling that it is wimpish to save," said David Wyss, chief economist at Standard & Poor's in New York. "The idea is to put away money for old age and we are just not doing that."

Is this such a bad development? Yes, it shows the success of coercive polices meant to foster consumption over saving. But let's keep in mind an important caveat: Today there are many other forms of saving that didn't exist in the 1930s, the preference for which may cause the official saving measures to show declines. That this happens reflects the extent to which money in a fiat world has ceased to be a store of value and has lost the market test to other goods perceived to have higher use and exchange values.

Christopher Westley a professor of economics in the Lutgert College Business at Florida Gulf Coast University and an associated scholar at the Mises Institute.

Image source:

Add Comment

Shield icon wire