Wednesday, September 27, 2006

Household Wealth and the Savings Rate

In our latest edition of "Economics for Your Life" we discuss the US savings rate in the context of overall wealth in the US economy. While many traditional economists fret over the low level of US savings, we trace the precipitous decline in the US savings rate back to 1980, and tie it to the secular bull market in US equities, and investments in real estate. We conclude that Americans are actually much better off than the savings rate alone would lead one to believe because their wealth is tied to real estate appreciation. The lesson here is that it is important to look at all data in context. The rising level of household wealth in real estate, an increase of $8 trillion since 2000 says much about the spending behavior, and resilience of US consumers. For a copy of this latest issue of "Economics for Your Life", see our website at


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