Re: Savings and NIPA

[Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>]

Wouldn't household debt count as investment?

Harry Veeder

> From: Esteban Perez <eperez@xxxxxxxxxxxx>
> Date: Mon, 28 Apr 2003 13:49:26 -0400
> To: pkt@xxxxxxxxxxxxxxxx, eo200@xxxxxxxxxxxxxxxxxxx, pdavidso@xxxxxxx
> Subject: Re: Savings and NIPA
>
>
> Godley and also more recently Th. Palley (JPKE, 2002) have made reference to
> the falling savings rate in the US which measured by NIPA accounts has been
> declining since the 1980's. But have emphasized another accompanying fact the
> rising trend of the household debt-income ratio. debt has increased faster
> than income. When one looks at savings and debt it is important alos to look
> at the distribution of income. Palley shows these results using Fed's (1998)
> Survey of Consumer Finances (p.21, JPKE, Vol 25, 1, 2002)
>
> Income                  debt/income                debt share
>
> <50,000                              2.98                         46
> (66% of all households)
>
>> 50,000                              1.40                          54
> (33% of all households)
>
> The decline in the savings rate is part of a bigger picture that also includes
> rising debt, rising profits, reduced savings rate, worsening distribution of
> income) and the question is is it sustainable?. Godley has also emphasized the
> current account deficit. A reduced savings rate per-se may not be the problem
> unless one thinks that savings determines investment.
>
> Esteban Perez
> ?-----------------------------------------------------------------