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
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By |2014-09-03T17:40:30+00:00March 26th, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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