Relevant and even prescient commentary on news, politics and the economy.

Spending soars, income stagnates, savings sink like the Titanic

Spending soars, income stagnates, savings sink like the Titanic  – by New Deal democrat Real life intruded yesterday, so I didn’t put up any information about the Q3 GDP report. I’ll write in detail next week, but in the meantime there were 4 basic highlights: 1. Obviously it was an excellent report overall. 2. The […]

Strong personal income and spending – near record low in saving

Strong personal income and spending contrast with near record low in saving  – by New Deal democrat Like retail sales earlier in November, personal income and spending both rose smartly, as shown in the below graph of real retail sales compared with real personal spending: Real personal income was up 0.4%, and real personal spending increased […]

Drop the corporate saving rate, please…

Update: The term corporate savings below refers to excess saving, gross saving over gross domestic investment, as a percentage of GDP. This is the defined 3-sector financial balance model (referred to below). The Federal Reserve Flow of Funds showed a third quarter shift in the financial sector balances: the corporate saving rate declined 0,25% to […]

Evaluating the "excess" in the US corporate financial balance

In a NY Times op-ed, Rob Parenteau and Yves Smith reminded us that the private sector financial balance is a function of the household financial balance and the corporate financial balance. They concluded the following regarding excess corporate saving: So instead of pursuing budget retrenchment, policymakers need to create incentives for corporations to reinvest their […]

Household leverage: what does the US have that the UK does not?

Earlier this week I compared household saving rates across the US, UK, Canada, and Germany. My conclusion was pretty simple: So generally, this simple analysis would suggest that Menzie Chinn’s skepticism of a “status quo” of US consumer imports is worthy. But with the status quo firmly in place in Germany, the household saving data […]

Household saving rates in the US, UK, and Germany: (possibly) light at the end of the tunnel

Menzie Chinn at Econbrowser breaks down US import data by sector to argue the following (see entire article here): What is clear is that consumer goods do not vary that much; now, part of auto and auto parts is going to satisfy consumer demand as well, and here we do have some evidence in support […]

The compensationless recovery

New York Times David Leonhardt argues that real wages are rising, so those resilient workers that remain employed will benefit from the bounce-back in “effective pay”. The problem with this insight is twofold: first, the expansion phase of real hourly compensation, a broader measure of total earnings, is falling; and second, sitting atop a mountain […]

Flow of Funds Accounts: some are deleveraging, while others are not

by Rebecca The Federal Reserve released its quarterly Flow of Funds Accounts, and the message is crystal clear: the private sector is dropping debt burden, while the public sector is growing it. Quarterly private sector debt growth, households + nonfinancial business + finance, has been slowing or negative since the second half of 2007. In […]

Broken Clock Day

Yves Smith quotes Thomas Friedman accidentally telling the truth: Since President Bush came to office, our national savings have gone from 6 percent of gross domestic product to 1 percent, and consumer debt has climbed from $8 trillion to $14 trillion. Please explain this in the context of the “savings and investment boost” that was […]