[PEN-L:447] Re: Re: Cyber-Sawicky

[Doug Henwood <dhenwood@xxxxxxxxx>]

Tom Walker wrote:

>True enough, but that's only part of the picture. Increases in liabilities
>-- most notably mortgage and consumer credit debt -- are also counted as a
>subtraction from net savings. So if an individual makes a $10,000
>contribution to a 401k and in the same year takes out a $10,000 second
>mortgage on the house, net savings are zero. Let's say an individual feels
>he or she has a lot of money (on paper) locked-up in retirement savings but
>is cash starved, taking out a second mortgage may seem like a prudent way to
>draw on the retirement account without having to pay a tax penalty.

Debts don't show up in the NIPAs, since they can't be charged against
current production, so they have no effect on personal savings. They do
show up in the flow of funds, which is why the "net financial investment"
figures were so tiny.

Doug