Savers are Just Collateral Damage
By Keith Weiner
GoldSeek.com
Monday, 30 April 2018
A reader asked us this week about the personal savings rate. Most people can sense that something is wrong if the rate is in a long-term falling trend, or if it falls too low (whatever level that may be). We argue that falling savings is part of the larger process of capital destruction. And unfortunately, one should expect falling savings rates when there is falling yield purchasing power.
The personal savings rate is defined as the ratio of personal saving to disposable personal income. Income excludes capital gains (as it should!) It is a measure of how much is left. This savings will pay for the saver’s own future, and in the meantime it is (presumably) invested to finance the production of new goods and services (and the government’s ever-growing welfare expense).
The personal savings rate is in a secular decline. As with other trends we have examined (e.g. marginal productivity of debt), the decline has a high correlation with the falling interest rate.
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