Thursday, March 4, 2010

Savings Rate

FLG reads a lot about how Americans need to save more like the Chinese.

This is pretty fucking obvious, but when interest rates are really low, it makes it more appealing to borrow and less appealing to save. It's not some failing of bourgeois virtue on that part of the American people that they've been borrowing money and spending money like drunken sailors. It's a direct result, at least in large part, of our fucking monetary policy. Wanna raise the savings rate? Then raise interest rates.

FLG realizes interest rates aren't the entire story, but they sure are a lot of it.

4 comments:

The Ancient said...

Wanna raise the savings rate? Then raise interest rates.

Eliminating Social Security would be so much more effective.

(BTW, I'm reminded of the fact that 20 or 30 years ago, freshwater economists were very fond of the argument that measures of personal savings needed to be adjusted to take account of accumulated housing equity. Don't hear that much anymore.)

FLG said...

Don't hear the term "freshwater economists" much anymore either.

Well, at least, I don't. Although, I happened to hear it yesterday.

Alan Howe said...

We don't need to eliminate Social Security, we just need to highlight the gap between payroll tax receipts and expected payout and alert people, specifically those making well above the poverty line, that they ought to be saving if they want to live much beyond the poverty line in retirement.

The Ancient said...

Alan Howe --

we just need to highlight the gap between payroll tax receipts and expected payout

Baby boomers -- well, the sentient minority of baby boomers -- have known this since at least the early Eighties. I don't see that it has altered their behavior a whit.

 
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