No One Told the NYT About the Housing Bubble

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Sunday, 02 January 2011 09:31
A chart accompanying an NYT piece on the difficulty of saving shows the sharp decline in the national savings rate in the 90s and the 00s. The piece suggests that this is due to the increased difficulty that people have in saving. The more obvious explanation is that the wealth created by the stock bubble in the 90s and the housing bubble in the last decade led people to consume more and save less. The effect of wealth in increasing consumption is one of the most widely accepted behavioral effects in economics.