Personal savings rate.

[av8torntn]

This is a very interesting article about the personal savings rate. I never really looked at it this way before.

http://time-blog.com/real_clear_politics/2007/02/personal_saving_rate_is_a_misl.html

"In the end the saving rate, as it is currently calculated is a useless measure of household balance sheets. "

Before I read this article I would have disagreed completely with this statement from this article.

 

[Jones]

I understand what he's saying about the problems with the way personal savings is being calculated, and his concern that the numbers are being used to scare people, but I don't think that scaring people is/was the intention of the people who devised the current formula.

If you want to identify trends, which I think is more important than the whatever the yearly number actually is, you have to apply the same formula each year or the data won't be comparable. If you start changing the formula you use whenever it starts giving you results that don't look good, you really will open yourself up to charges of manipulating the data for political gain, which is probably why they stick with the current formula even though it may have some problems.

Brian Wesbury is an interesting guy. He's a top economist and extremely intelligent, but he's also a bit of a contrarian and he seems to enjoy being in the minority. Guys like that always make wonder if the desire to be in opposition to the mainstream doesn't color their thinking.

Near the end of the article he says that using his calculation the personal savings rate is around 37%, which just from my personal perspective seems awfully high. I'm putting away 25% of every paycheck, and that leaves me kinda tight. When I talk to guys at the center noone else is even saving that much, especially the ones with children. I know that's purely anecdotal, but I don't think my center is that unusual.

 

[av8torntn]

It is hard to believe someone would say that personal savings is a useless measure. I always thought that the most important measure was the amount of unsecured debt. When I read the article it did cause me to find out who this guy was. Impressive background and seems very intelligent.