Are underlying US personal savings even higher than the 6.9% rate reported for May by the BEA?
The circumstantial evidence certainly suggests as much, notably the relative ease with which the Treasury is funding deficits despite a marked loss of foreign interest beyond the very short duration market. The reported personal savings rate would finance a $600bn deficit, plus another $400bn from the corporate sector, leaving about $800bn to be funded by foreign central banks and private buyers. But if personal savings are already at the levels I forecast last Autumn in the high single digits, it suggests that the pressure to attract foreign capital flows is not as great as markets currently assume. Between 2000 to 2007 US consumer debt grew as much relative to income as in the previous 25 years, and that huge leverage is now being unwound, which will be a key global economic trend in coming years. Each percentage point on the savings rate translates into about $100bn flowing into the financial system to be invested. I’ve maintained that a key impact of the crash of 2008 would be to m
