Michael P. asked
is the 1.1% negative savings rate unprecedented?
Certainly, considering the circumstances (no Great Depression or World War). I am not sure which figures you are using for the -1.1%, (off the top of my head, I thought the NIPA figure was less dramatic, cf the NIPA tables at http://www.bea.doc.gov/bea/dn/nipaweb/TableView.asp#Mid ). BUT, one should also add that these often-quoted numbers are misleading since the personal savings is as a percent of current *income* only. For the better off, lots of things that were considered income, and really are income, are now channelled through the expansive tax and regulatory loopholes and bypass being counted as "income" and go straight into "savings" as wealth (401k, stock options, etc). So, to get a full picture of how things have changed one needs to stitch together income savings and wealth accumulation figures (and leave out retirees). Lots of other technicalities also come into play but I think you will find them less interesting for your purposes. It only gives charts back to 1980 but see, for example, 'Alternative Measures of Personal Saving' by BEA economists www.bea.gov/bea/ARTICLES/2004/09September/PersonalSavingWEB.pdf ) And of course, to get the full-full picture of how things are truly bad...the figures should be broken down by class. You can imagine what the savings rate and wealth accumulation looks like for the bottom 80% over the last two decades. (A while back I fiddled with a CD from the Fed of the SCF and I recall the change was a shock. And I reported to Pen-l previously about Wolf's work on changes in wealth.) Essentially half of the New Inequality has been "shielded" from the American working class - they are borrowing (or drawing on inflated asset values) to postpone its impact (which will of course make things all the more difficult in the end). China et. al are financing a slow adjustment to a new American inequality and a 1920's society. When that foreign financing ends and the crunch hits, "we" will have to "adjust" (i.e. the 80% will have to lower its standard of living to match current income minus the debt). The Neoclassics will say "we" recklessly lived beyond our means/lost international competitiveness, etc. Less hard liners will declare it an international financial crisis that calls for greater international collaboration-intervention, or even to Keynes' never implemented Bretton Woods vision of symmetric adjustment etc. But that crisis will actually be the direct result of the greed (and subsequent politics) that imposed this new emerging yet more unequal society and found the financial overextension a necessary convenience to that ends. [Sorry for the tirade of the obvious] Paul
