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To: Lizzie Tudor who wrote (159770)	1/8/2004 9:12:29 AM
From: GST	Read Replies (2) \| Respond to of 164684

No, stock investment is NOT savings. Is stock investment a good thing as part of a persons overall financial planning -- sure it is. But is it savings -- no it is not. Does it matter that we do not save -- yes it does.

To: Lizzie Tudor who wrote (159770)	1/8/2004 11:10:58 AM
From: Oeconomicus	Respond to of 164684

Lizzie, the "personal savings rate", which is reported as part of the quarterly NIPA tables (GDP and personal income and outlays releases), does NOT "exclude" stock investments. "Personal savings" is simply personal income less personal consumption expenditures. Neither retirement plan deductions from your pay nor purchases of stocks (or any other kind of security) are counted as "consumption." What you may be thinking of is the fact that capital gains on investments (or your home, for that matter) are not included in personal income. So in that sense, "personal savings" understates the accumulation of personal wealth over the long term (though not from spring 2000 to last winter, of course - except for the shorts;-). Also, since for most Americans equity in one's home accounts for most or all of one's net worth, it fails to capture that wealth accumulation as well. But most importantly, looking at the personal savings rate alone and comparing it to government deficits (and other demands for capital) as GST is doing when he claims "we don't save enough" is highly misleading. Personal income, and thus personal savings, does not include corporate profits, most of which is NOT distributed in the form of dividends (which are included in personal income), but rather are retained and invested. This is a much bigger source of capital to fund government deficits and private capital needs that personal savings. Corporate profits are currently running at about six times the amount of personal savings ($1.124 trillion to $188 billion in Q3, annualized). Net of dividends paid, "corporate savings" ran at a $692 billion annual rate in Q3, 3.7 times personal savings. Together with personal savings, that's $880 billion a year and growing, but GST wants you to believe we, as a nation, are only saving at the $188 billion/year rate.