America's low savings rate

Doug Henwood dhenwood at panix.com
Mon Aug 20 08:25:24 PDT 2001


Jordan Hayes wrote:


>Doug writes:
>
>> Capgains are purely fictitious ...
>
>But only in the large; in my individual account, they are quite real to
>me. So psychologically, 401(k) "winners" are less likely, I think, to
>worry about other kinds of savings. Stocks go up, stocks go down, but
>over the last 10 years, nearly everyone who owned mutual funds in
>401(k) accounts has "made" a ton of money.
>
>And those winnings feel like savings (since they aren't presently
>consumed).

You're right about the psychology - that's how the wealth effect works (though it's sometimes kind of hard to prove that the wealth effect actually exists). Because of stock market gains, upper-income folks saved less and spent more than they would have otherwise, and it's highly likely that middle-income folks imitated the behavior because of the exuberant psychology of the bubble years.

Doug



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