Friday, October 28, 2011
Personal savings fall 32% since June as a consequence of the debt ceiling debacle
The personal savings rate fell to the lowest level in four years and it's no surprise why: gov't spending fell off sharply during the whole debt ceiling debacle. Since gov't deficits add to private sector income and savings, then savings will understandably fall as the deficit shrinks. If savings get low enough, it could cause a very sharp economic downturn as households reduce consumption in order to raise their savings. At the economy's peak in 2007, the savings rate hit 1.7%.