Henry´s quote from the Stephen Roach piece

["Joerg Wenck" <j.wenck@xxxxxx>]

In a recent post, Henry quoted a Stephen Roach piece which says: "In the first quarter of 2003, such depreciation accounted for fully 94% of total saving."

Do U.S. statistics correct for the deflator previously applied to investment in computers and software? If you create a hundred billion dollars (probably more) of extra investment out of thin air by way of fancy accounting, you are then bound to have bloated write-offs in later years, aren´t you? Except, of course, if you eliminate the deflator before doing the calculation. This wasn´t usually done in the stories that tried to feed the impression of U.S. exceptionalism in accelerated productivity growth. Is Roach´s account of saving almost wholly consisting of depreciations equally faulty?

I would believe that there must be a very substantial increase in savings due to changes in U.S. employment structure. Employment of older workers is increasing in absolute numbers and percentage share of the total.

On the other hand, Business Week just reported: "Indeed, the young are getting poorer. From 2000 to 2002 alone, the household income of those under 35 dropped 14% -- the biggest decline of any age group, according to the Federal Reserve's Survey of Consumer Finances." So where is the increased demand going to come from once credit-induced spending fizzles out? O.k., there is the tax cut, and at some time foreign demand should kick in - but the numbers and the timeframes don´t add up to anything like a credible proposition, I think.

Joerg Wenck