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Politics : Ask Michael Burke
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To: Tommaso who wrote (85711)11/20/2000 10:28:49 AM
From: Oblomov  Read Replies (1) of 132070
 
Tommaso, this point is frequently made by new economy economists. If this is the case, then why do the new economy adherents not tell us what the savings rate is when adjusted for capital gains? Household capital gains are calculated quarterly in the Flow of Funds accounts. The fact is that household equity positions have declined in value by over 8% from Jan 2000 to Sept 2000 (and probably even more since the end of September). This same report shows that real estate values increased by 2% over the same period. Further, despite what mainstream economists are saying to the contrary, the typical American household does not participate in any significant way in the stock market (majority have <$5K in stock market). Instead, the vast bulk of household wealth is stored in real estate values. Which means that the typical American consumer is even more profligate than the savings rate reports would suggest. Real estate is not liquid, and all of the demographic trends are running against it if you live in the Midwest or Northeast US. Also, the % equity in home values is at a post-WW II low, probably because so many first-time buyers in the last 6 years have bought with no money down or even a 15 - 20% takeout at closing. It's a good thing that we have repealed the business cycle.
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