Monday, July 30, 2007

Savings Rate Shocker!

This ought to be an earthquake news event in the narrow subset of financial/economics news, but, as Luskin states, it ain't gonna be. It is one thing for pessimists to tout the savings rate, which is meaningless (more here), as evidence of impending economic doom. It is entirely another thing to tout a savings rate that was totally wrong, indicating a negative when in fact it was positive. Now the argument is not a theoretical one over the merits of the savings rate, but one of degree as the pessimists will surely continue to complain that Americans don't save enough. Of course this puts them in the role of arbiter of what is "enough". How do they know? Good question. Probably that same vaunted expertise that led them to make the silly argument that the richest people on the planet don't save money.


Blogger Tax Shelter said...

It's not how much one saves that matter. Rather, the key is return on investment. For example, one can have negative savings rate but still get rich by borrowing money and invest it on something with even higher rate of return. Those who focus on the savings rate don't fully understand how wealth is created.

9:01 AM  
Blogger Donny Baseball said...

exactly, but at least they sounded good when they waxed pessimistic. Now they don't even have a cosmetic appeal to the argument!

10:49 AM  

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