Economics Post: Borrowing + Low Savings = Binge Consumption
Got this from Angry Bear's article comparing two slightly different views on the current account deficit, the low US savings rate, and the lowering Net Investment rate (click here for the graph).From one of the linked posts, I think this explanation is the clearest way of describing our current situation:
Investment has actually declined as a fraction of GDP over this period, and I don't see why it's going to be that much easier for either the government or private households to pay off that debt in the future. Instead to me it has more the appearance of a consumption binge.You can see that the savings rate as a % of GDP dropped DRAMATICALLY starting about the time the Dubya got into office. So pretty much, I'd say he's helped drain out everybody's savings accounts by billions.
posted by jimboses @ 12:49 PM
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