Paul Dales, an economist at Capital Economics, said the big decline in the savings rate was "disconcerting" because it called into question the durability of the current rebound in consumer spending.
The drawn down of savings for consumption is one of many trends that are disconcerting about the liquidity driven economic recovery. When savings rate turns negative, the statisticians will simply recalculate personal income. Statistical massages, however, do not create real income to spend and invest.
Personal Savings As A $ of Personal Income:
The trend of spend rather than save and invest (domestically) only sends productive capital overseas. It is this capital that is raising standard of livings internationally. The market will continue to teach this lesson until capital flows reverse. Unfortunately, few understand or acknowledge these trends.
Personal Consumption As A % of Personal Income:
Source: finance.yahoo.com
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