The Economics Reporting Review posted by Dean Baker contained the following
story:
------------------------------
"The Wealthy and the Wealth Effect," by John M.
Berry
in the Washington Post, May 13, 2001, page H1.
This article reports on the findings of a new
Federal
Reserve Board study of savings behavior. The study
found that the sharp decline in household savings
over the last decade is entirely attributable to a
drop in savings among the richest 20 percent of
households. In turn, the study attributes the drop
in
savings among this group -- which owns 96 percent
of
individually held shares -- to the wealth effect
created by the soaring stock market. In effect,
the
study shows that the rising stock market has
reduced
national savings in much the same way as a large
federal budget deficit would.
-----------------------------------
Isn't it Keynesian dogma that the problem with the rich is that they save
and do not consume (relative to the non-rich), and that the government can
goose the economy by redistributing wealth from the rich (the savers) to the
non-rich (the spenders)? How do Keynesians explain data like this -- the
national savings rate actually drops when the rich increase their wealth?
Thanks,
David
