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What Will Happen If America Returns to an Historical Savings Rate? — Seeking Alpha

March 30, 2010

What Will Happen If America Returns to an Historical Savings Rate? — Seeking Alpha.

In the 1960’s the American savings rate was about 12-15% then it steadily inched down. When our economy was booming from 2000 – 2008 the savings rate was essentially o%.  After this recession and large-scale loss of homes and jobs the savings rate has started to inch up slightly. If this trend continues will it slow or put a damper on the recovery that seems to be at hand currently. I believe if monetary policy remains loose as it is now the savings rate will go back to zero or less than zero so basically people will be living on credit again. The economy will boom which is great for us all as a whole but our individual economies will suffer as a result. Credit card bills, auto loans and home loans will go up as a percentage of our monthly salary.

As the article above points out what if the savings rate were to go back to the 1960 rate of 12 to 15 % the economy would stall for a period of time as stores adjusted inventory and possibly closed so that the supply could catch up with the lack of demand for products in the marketplace. I don’t see our savings habits changing that much but if we all changed a little the economy wouldn’t feel it and our personal balance sheets would be a little better off.

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From → money

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