The Dutch investment bank ING reckons talk of Americans rediscovering savings is misleading.
Households are slashing their purchases of financial assets. The savings ratio is rising because borrowing is falling even more rapidly. The household savings ratio climbed to 6.9 percent in May, up from a low point of 0.4 percent in 2005. But their purchases of financial assets plunged to -0.5 percent of income in the first quarter (the most recent data), down from a recent peak of 21.6 percent in 2004.
Given this, it will be more than interesting to see the second quarter figures, which should reflect most of the March to June global equity rally. But until then, what do you think? Is the “Americans are saving” mantra misleading?
Emily Kaiser adds:
Jeff Frankel at Harvard has an interesting take on this theme. He’s arguing it’s the end of the global savings glut. Chairman Bernanke, if you’re reading this, what do you say to that?
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5 comments so far
If you assume not spending money equals saving then yes, I believe the lack of spending is more a case of not having the money to do so.
- Posted by Nikkei 225It seems Americans are simply getting poorer
- Posted by yrHaven’t we always heard that paying off a credit card balance at 9% is like making 9% on your money?
- Posted by KaikaneSounds like investing to me!
…why is it that many Americans don’t know that the Federal Reserve is a private business.
I’m no conspiracy theorist but it seems strange that for a country in so much trouble,one would seriously think about improving it’s banking system..starting with the Fed…
God bless Canada….
- Posted by Lorne SchafferNot to sound too cynical but the idea that Americans are saving simply because consumer spending has dropped is laughable. The inability to obtain credit for more purchases just means that cash is being used to fund necessities, rather than credit being used to fund things we really couldn’t afford in the first place. The end result is not saving, just spending less money and hopefully incurring less debt.
- Posted by Austin Apartment Pro