Doug Henwood wrote:
But it turns out that income growth was even slower than originally thought, meaning that people have been saving less/borrowing more/liquidating more savings. Roach concludes also that the stock boom has stimulated spending. This was already the most consumption-driven expansion of all post-WW II bizcycles on the old numbers - but it's even more so now. No wonder the U.S. foreign accounts are deteriorating and personal bankruptcies are at record levels. The big question is - what happens on the downside, if there is one?
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Here's an amateur addition: An Associated Press story on August 4 is headlined "Americans saving less than they ever have: U.S. economy thrives despite thriftlessness"
(It begins) "Talk about a morality tale turned upside down: Free-spending Americans are the economic envy of the world, while the Japanese, those industrious savers, are swamped by economic troubles.
Americans' personal savings rate dipped to 0.2% in June, the lowest level since the government began tracking savings on a monthly basis in 1959,officials said Monday.
And newly revised annual figures, which go back further, are abysmal as well. They indicate that the personal savings rate dipped to a 63-year low of 2.1 percent last year. Not since the Great Depression during the 1930's has the savings rate been lower.
But these aren't depression times. Far from it. the nation has enjoyed (sic) 7 ½ years of uninterrupted growth. Jobs are plentiful and incomes are rising.
So why isn't the savings rate going up ? Especially, when 73 million baby boomers - one-third of the population - are headed into what should be their peak savings years, their 40's and 50's, a time to squirrel away money for retirement, given the widespread doubts about Social Security."
I sure this has been discussed here before, but how about a rerun for the amateur ? Does this low savings rate mean that the recession will be aggravated when it comes ?
Charles Brown