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U.S.Saving Rate: Zero

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Year 2000 Economics
by Daniel

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A LOOK BEHIND THE U.S. SAVINGS RATE CALCULATION

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Supplemental page to Global Economic InstabilityThe U.S. savings rate, as calculated by the Commerce Department , is currently in negative territory.  It's been this way for a few quarters now.  Looking back, the number in 1996 was 3%.  In 1997 it was 2% and in 1998 the number came in at 0%. 

Year

Household Debt as a % of Disposable Personal Income

1975

57.9 %

1984

63.5 %

1993

80.2 %

1999

97.3 %

This means that the boom we are currently witnessing is fueled by consumers spending not only all disposable income, but going into debt in a spending binge the likes we have never seen. This cannot and will not continue indefinitely. This also means the health of the economy has become dependent on sky-high stock market valuations and the wealth effect it creates.

At some point consumers will retrench and begin saving again. An action that would throw the economy into a tailspin. And yes, it will be deflationary.

What's interesting is the fact that even in this so-called economic boom, the personal bankruptcy rate is near record highs! Just imagine it in 2000.

Home Page:
Year 2000 Economics
by Daniel