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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: valueminded who wrote (64541)	7/14/1999 9:46:00 AM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Chris, I define savings as personal net income less taxes paid to give you disposable income. What you don't spend out of disposable income on consumption is saved. There are some legitimate issues with respect to the savings rate like capital gains taxes reduce disposable income and therefore savings rate but the savings rate has been computed the same way over a long period of time so its trend is alarming ( see chart) home.att.net When looking at the savings rate we are looking at the consumption behavior of consumers. If you do not save you cannot accumulate wealth. When you put savings into a brokerage account the subsequent capital gains/losses are not in the computation nor should they be because we are looking at current behavior. I think some of the confusion is the layman thinks of savings as accumulated savings but the saving rate looks only at the current year. Rising asset prices do seem to make savings unnecessary but when they fall the savings rate will rise, consumption will fall and it will have a contractionary effect on the economy. On your second point debt to net worth HO HO HO stock prices fluctuate -sometimes down. Todays solvent investor with 1000000 in stocks will become tomorrows insolvent investor when those same stocks are worth 500000. The public has a record high % of net worth in the stock market -this WILL be a problem WHEN stocks decline. We are all familiar with the record high ( by a big margin) valuations. A 60 -70 % bear market will destroy this net worth picture. Mike