A LOOK BEHIND THE U.S. SAVINGS RATE CALCULATION
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 beyond 2000.
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