Comments for Washington Post Doesn't Know Which Way Is Up #45,671: Savings are Low, not High at http://www.cepr.net , comment 1 to 8 out of 8 comments http://www.cepr.net Tue, 21 May 2013 22:52:33 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/washington-post-doesnt-know-which-way-is-up-45671-savings-are-low-not-high#comment-19452 More like the savings rate began to stagnate when real wages began to stagnate and people began to dig into their savings to make up the difference. - FoonTheElder Tue, 09 Oct 2012 07:28:31 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/washington-post-doesnt-know-which-way-is-up-45671-savings-are-low-not-high#comment-19253 All Dean is saying is that the median household approaching retirement is dependent upon income from pensions and social security to meet all expenses other than interest on mortgages. Or to say it differently, those households have no effective income earning investment assets. If they have them, they're being used to pay the mortgage; if they don't have a mortgage, then, they don't have investment assets. - ellen1910 Tue, 02 Oct 2012 12:19:36 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/washington-post-doesnt-know-which-way-is-up-45671-savings-are-low-not-high#comment-19247 Isn't the problem exactly that savings has risen, despite being below historical norms? Clearly we haven't been under normal circumstances for the past two decades in terms of trade so you'd expect low savings during that period. I get your overall point, that we can't get a sustained recovery by boosting already high consumption rates, and need short-term deficits and balanced trade. I guess I can't shake the "Global Excess Desired Savings" analysis via Bernanke-Krugman though. I guess you can say savings are low historically, but still high enough that the gov't can put them to use through deficit spending. - Stephen Tue, 02 Oct 2012 05:56:29 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/washington-post-doesnt-know-which-way-is-up-45671-savings-are-low-not-high#comment-19246 "the median household approaching retirement has roughly enough money to pay off the mortgage on their house" This seems like a piece of statistical finagling as well. I realize that there is a lot of people refinance or move right up to retirement, but surely the mortgage balance or near retirees is not the same distribution as that of the entire population. - Arne Tue, 02 Oct 2012 05:37:29 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/washington-post-doesnt-know-which-way-is-up-45671-savings-are-low-not-high#comment-19244 "It (savings rate) began to fall in the late 80s when the wealth created by the stock market run-up led to more consumption. It fell as low as 2.0 percent in 2000 at the peak of the stock bubble. It then fell even lower at the peaks of the housing bubble in the last decade." You mean to say that as the savings rate fell, consumption increased and the economy expanded??? But, but that contradicts all conservative economic theory and validates Keynesian economics! That is IMPOSSIBLE! - Paul Tue, 02 Oct 2012 05:24:01 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/washington-post-doesnt-know-which-way-is-up-45671-savings-are-low-not-high#comment-19241 Stock prices peaked around 1969 and declined severely during the 70's, while savings rate continued up. - skeptonomist Tue, 02 Oct 2012 03:42:47 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/washington-post-doesnt-know-which-way-is-up-45671-savings-are-low-not-high#comment-19240 Dean's explanation of the decrease in savings rate as due to wealth effects does not fit the facts. The decline started around 1980 when stock prices were extremely low - nobody was feeling wealthy because of stock prices at that time. Stock wealth really began to increase in the late 90's, but there was no particular decrease in savings rate at that time, nor was there any big change after the dot-com crash in 2000. More likely explanations include the proliferation of credit cards, and the decline of real wage income, which crashed badly starting in the 70's: http://www.skeptometrics.org/WeeklyWages/WeeklyWages.htm A decline in purchasing power can alternately be considered an effect of rising prices because of the inflation of the 70's and 80's which was not accompanied by as great a rise of nominal wages. - skeptonomist Tue, 02 Oct 2012 03:35:09 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/washington-post-doesnt-know-which-way-is-up-45671-savings-are-low-not-high#comment-19237 The usual flim-flam is to mix up mean and median. People don't notice the difference between the average household (median) and the average amount held by households (mean). Given the degree of inequality in the US, there is a large difference between mean and median. Throwing in average 401(k) takes the confusion a step further. - foosion Tue, 02 Oct 2012 01:42:06 +0100