Another story I may have missed?

Posted by Rob Walker on March 25, 2009
Posted Under: Uncategorized

My last inquiry along these lines didn’t turn up the story I was hoping had been written, but …

I’ve been wondering, in regards to the rising savings rate — how much of that is a result of people moving their money out of IRAs and the like (which I believe the official savings rate does not count) into bank accounts? Anybody read anything about that?

I ask because during the years when the savings rate was falling to, or below, zero, many pundit types on the conservative side insisted that this measure didn’t matter, because it didn’t capture equities in 401(k)s. Or at least that’s what I remember. Thus my curiosity. (Since lately the savings rate seems to matter again.)

I’m quite certain I’ve read that a lot of people have shifted their assets away from stocks and into cash, and if I am remembering right about the above then that should be at least something of a factor in the increase in the official savings rate. But how much?

Anybody read anything about this?

Further diversion may be found at MKTG Tumblr, and the Consumed Facebook page.

Reader Comments

I wonder if places like Emigrant Direct have seen an increase in transfers out of equity accounts into their high-interest/no branches system? Anything above 2% is a miracle at this point.

Written By Ryan Holiday on March 25th, 2009 @ 5:40 pm

It makes little difference the form of the savings. Savings = income – consumption = net asset acquisition – net liability acquisition. The form of net asset acquisition is irrelevant to how the savings rate is calculated.

It is however relevant to the broader financial economy as it means plunging equities, higher risk spreads etc.

Written By Charles on March 25th, 2009 @ 10:26 pm

Interesting question, Ryan.

Charles: Yes, but, maybe I have this wrong, but if I cash out all my stocks and put the proceeds in the bank, isn’t that actually counted as income? Whereas if I buy stocks, it counts as spending. Am I wrong about that? I’m pretty sure that’s how pension contributions are counted — as spending. (And pension payouts count as income.)

Again maybe I’m wrong but this is what I remember the argument being — that the saving rate doesn’t properly account for equities (or for spending on housing (which many people consider an investment/form of de facto saving; but it’s not clear to me what the impact of the declining housing market would have on the savings rate, if any, so that’s another story).

Possibly I’m just mis-remembering the arguments, but I’m certain I read many times from some commentators that there was no reason to worry about the declining savings rate, etc. And now, looking at it in the rearview mirror, everybody seems to agree it was a huge problem.

Written By Rob Walker on March 26th, 2009 @ 6:16 am

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