In a recent NYT article entitled “Americans Are Finally Saving. How Did That Happen?” Ron Lieber wrote:
This was the year of the return to financial sobriety — if you judge such things by the nation’s personal savings rate
Most other journalists and economists have take the same position–that Americans have reacted to the recession by saving more.
But for the U.S. economy as a whole, the savings rate has not gone up–it’s actually fallen .
What we see here is that the net national savings–the sum of personal, corporate, and government savings, net of depreciation–has been plunging rather than rising . The net national savings rate fell to -2.5% in the third quarter of 2009, its lowest level since the Great Depression. That’s astounding low.
What’s going on here? As this chart shows, savings in the private sector has been on the rise, including both household and corporate savings, as most people believe.
But the government is running such big deficits that they swamp the savings gains in the private sectors.
Here’s another way of putting it: The government is borrowing a lot of money and transferring it to the private sector, through fiscal and monetary stimulus. The private sector is using some of those transfers to boost savings. But on net, the country’s savings rate as a whole is falling.
No financial sobriety here.
Note: These charts use savings net of depreciation. The same analysis holds using gross savings. Also, for the purposes of these charts, I have ignored the various adjustments to the official savings rate that I have made in previous articles.
Edited 1/5/10: Slight changes to chart language to clarify calculation.