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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (3987)	6/4/2001 4:43:15 PM
From: Moominoid	Respond to of 33421

When you say that savings are in the corporate sector, do you mean household savings are in the form of stocks and bonds rather than in passbook savings accounts? If so, then the $3-4 Trillion haircut that investors have suffered in the stock market since March 10, 2000 would seem to indicate to me that we truly aren't saving much at all. When individuals buy stock with newly earned income that is counted as saving and when they sell as dissaving. But the capital gains aren't counted as saving by individuals and if they sell stock and realize the gains the income they receive isn't counted as personal income in the national accounts. So personal saving is salary and dividend and rent and interest etc. income of individuals minus their consumption expenditures. If retired people sell off their investments at the same rate that the young save then the net saving rate would be zero. Saving in corporations is when they retain profits which do include capital gains of course. As dividend payments have gone down and more profits have been retained there has been a shift in saving to the corporate sector. It is now the big net saver in the economy, though the government in the last couple of years is beginning to save by paying down the debt - until Bush's tax cuts will kick in. If firms buy back shares instead of paying dividends the capital gain component distributed won't be personal income either and the principal isn't in any case. The loss of paper gains and realized losses in the market crash by individuals will only have an effect on saving in as much as they affect those consumers other behavior - I'd think they will push up saving as the wealth effect declines. Not sure where capital gains on property come into all this. Maybe someone can explain that? David