National Savings, National Shame?

Friday we’re going to hear about the savings rate. And a whole host of economic scolds will berate the US consumer for his profligate ways.

It’s no secret that the savings rate has declined. 25 years ago US workers set aside over 10% of their reported income. Now the rate is about zero—or even negative.

Many observers look at this and only see the wastefulness of the American public. “Goodness,” they exhort. “People should be more careful.”

I look at it another way. People tend to save money when they are uncertain about the future. The savings rate was pretty high from  World War 2 until the early ‘80s, when Paul Volker began to slay the inflation dragon. Since then, during what economists call the Great Moderation, the savings rate has been falling.

By this view, the low savings rate is not a sign of national weakness. Rather, it is an indicator of economic security.

Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!

Follow me on Twitter @GlobalMarketUpd

direct: 603-252-6509
reception: 603-224-1350 •

Leave a Reply

Your email address will not be published. Required fields are marked *