Or maybe not:
It seems the media and even some economists who should know better have no problem pushing the panic button over any data that suggest the economy is struggling — but studiously ignore anything that suggests we're actually thriving economically.
So it is with the savings rate. Each time it's announced, a round of tut-tutting is heard from pundits, economics wonks and policy-makers about how Americans are "spendthrifts" and "just don't save enough."
To which we answer: Nonsense. Indeed, the savings rate is one of the least useful pieces of data issued on our economy.
We've saved plenty, as shown on the accompanying charts. In the fourth quarter, we had amassed $1.8 trillion in gross savings — more than enough to fund the estimated $1.43 trillion in private nonresidential investment we made.
How could savings be so high when we're constantly told it's at Depression-era lows? Easy. The scare stories focus solely on personal savings, failing to take into account the savings of households, businesses and government. When those are added in, we have an enormous amount of money at our disposal.
Those who say a low savings rate is bad for individual households are correct. Problem is, there's no evidence Americans aren't saving much. Rather, the "savings rate" doesn't capture what they save.
But if savings doesn't matter, what does? In a word, wealth.
Net wealth — the total value of all assets, including stocks, bonds, bank accounts, houses and retirement funds, after subtracting debt — is about $54 trillion, up a hefty $16 trillion since President Bush cut taxes in mid-2003. If you divide that $54 trillion by America's 114 million or so households, you get an average net worth of roughly $474,000.
So you can see why Americans aren't putting away money at the end of the month from disposable income. They don't need to. Or they're already doing it but it isn't measured.
So stop worrying about the plunging personal savings rate. The game's not about accumulating savings; it's about building wealth — something we Americans are very, very good at.
Don't worry, be happy!
hat tip: Will Franklin