3 ms·

Doesn’t people saving more imply a low level of confidence in their economic future? Kind of like storing food for a long winter?

JumpCrisscross 3y ago
> Doesn’t people saving more imply a low level of confidence in their economic future? In the long run "households reduce their savings rate when consumer sentiment is high" [1]. In the short run, "higher interest rate is associated with higher personal savings rates while increases in real disposable income are associated with declines in the savings rate." But households today aren't choosing to save rather than spend; they're increasing both. All while interest rates are high and household debt to GDP remains stable [2]. [1] https://www.researchgate.net/profile/James-Payne-4/publication/228224745_The_Long-Run_Relation_Between_The_Personal_Savings_Rate_And_Consumer_Sentiment/links/54d21ec60cf28370d0e1bc5a/The-Long-Run-Relation-Between-The-Personal-Savings-Rate-And-Consumer-Sentiment.pdf https://www.researchgate.net/profile/James-Payne-4/publicati... [2] https://fred.stlouisfed.org/series/HDTGPDUSQ163N https://fred.stlouisfed.org/series/HDTGPDUSQ163N
JohnFen 3y ago
I don't know about most people (and assume I'm the odd one here), but when times are good, I dramatically increase the amount I'm saving. Times are good, after all, so I can set more aside without increasing any pain. When times are in-between good and bad, I save at a much slower rate (my baseline savings rate of 10% of my net income). Right now, that's what I've been doing -- but I think I'll be increasing the rate of savings here soon. Things seem to be easing. When times are bad, I'm more likely to dip into my savings. My saving rate isn't tied to where I think the economy will be tomorrow, it's tied to where my personal economic situation is in the moment. Basically, I don't vary my standard of living according to the state of the economy. I vary my savings rate instead.

JumpCrisscross 3y ago

> Doesn’t people saving more imply a low level of confidence in their economic future? In the long run "households reduce their savings rate when consumer sentiment is high" [1]. In the short run, "higher interest rate is associated with higher personal savings rates while increases in real disposable income are associated with declines in the savings rate." But households today aren't choosing to save rather than spend; they're increasing both. All while interest rates are high and household debt to GDP remains stable [2]. [1] https://www.researchgate.net/profile/James-Payne-4/publication/228224745_The_Long-Run_Relation_Between_The_Personal_Savings_Rate_And_Consumer_Sentiment/links/54d21ec60cf28370d0e1bc5a/The-Long-Run-Relation-Between-The-Personal-Savings-Rate-And-Consumer-Sentiment.pdf https://www.researchgate.net/profile/James-Payne-4/publicati... [2] https://fred.stlouisfed.org/series/HDTGPDUSQ163N https://fred.stlouisfed.org/series/HDTGPDUSQ163N

JohnFen 3y ago

I don't know about most people (and assume I'm the odd one here), but when times are good, I dramatically increase the amount I'm saving. Times are good, after all, so I can set more aside without increasing any pain. When times are in-between good and bad, I save at a much slower rate (my baseline savings rate of 10% of my net income). Right now, that's what I've been doing -- but I think I'll be increasing the rate of savings here soon. Things seem to be easing. When times are bad, I'm more likely to dip into my savings. My saving rate isn't tied to where I think the economy will be tomorrow, it's tied to where my personal economic situation is in the moment. Basically, I don't vary my standard of living according to the state of the economy. I vary my savings rate instead.