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March 04, 2009

The Importance of Perspective

Via Tigerhawk, a neat graph of personal savings as a percentage of disposable income over time.

The ten year view looks fairly flat, and the effect of spikes is magnified:

10 year view.jpg

It's only by backing off to the fifty year view that the overall trend emerges: personal savings increased throughout the sixties and most of the seventies. The savings rate peaked in the early eighties and have declined rapidly ever since:

long view.jpg

There's a lesson in here. I leave it to you to decide what it is.

Update: because I can't resist....


Of course you really need to look at the whole thing, but it is amusing, no?

Posted by Cassandra at March 4, 2009 08:26 AM

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Well, I'm no Dr. Harden Stuhl (and I didn't stay at a Holiday Inn Express last night), but with an EKG like that, I'd say the *patient* is in serious trouble.

Posted by: DL Sly at March 4, 2009 11:28 AM

Hoping to be of assistance during this time of deepening cardiac stress, Peabody Labs is offering the service of our latest defibrillator.

This life-altering device was designed and produced after reviewing the FY2010-FY2012 budget Peabody Labs will have to work with after the implementation of the US Federal budget.

Yes, this device was tailor made with the President and several members of Congress in mind.

Posted by: Mr. Peabody at March 4, 2009 12:30 PM

> There's a lesson in here. I leave it to you to decide what it is.

Cass, note the mostly steady decrease really started after the 1990 shift in the CRA.

Prior to the CRA, you absolutely had to save money, typically 10-20k, in order to buy a house. After that, you needed less and less until you got to "100% financing" ca. 2000.

Without any actual *analysis* to back me up, I will still assert that this is one of the chief causes for the drop in savings. People used to save for 5-odd years before they could swing a house. Now there was no need to do such, and, with home prices rising, little cause for doing anything in that direction, since you were better off sinking the money into paying off the principle.

Not saying everyone did that, but it seems to make a certain amount of sense.

Posted by: Obloodyhell at March 5, 2009 03:05 AM

Years ago, after reading an article on this same subject, I called the reporter, a business reporter.
He was using the standard definition, household income less household expenditures.
So I asked him if the following were considered expenditures or savings:
"Buying" mutual funds.
Mortgage payments
buying cash value life insurance
buying annuities

I had several others which escape me at the moment.

His response was to say he had no idea. So I said, then we don't really know anything about savings, do we?
His response, "That was the thrust of the article."

Posted by: Richard Aubrey at March 6, 2009 12:22 PM

I'm with obloodyhell -- my first theory was that the decline began with the CRA in the late 1970's. But for whatever reason, that's also when credit card debt began to be so widely available.

Posted by: Texan99 at March 6, 2009 12:27 PM