A rigorous new analysis for the Rockefeller Foundation shows that Americans are more economically insecure now than they have been in a quarter of a century,
Given that we\’re in he worst recession in 25 years, that really is a surprise.
But that\’s just a cheap shot of course. What\’s more interesting is the measure used to detail \”economic insecurity\”.
The analysis was done by a team of researchers led by Professor Jacob Hacker of Yale University. They created an economic security index, which measures the percentage of Americans who experience a decrease in their household income of 25 percent or more in one year without having the financial resources to offset that loss.
Hmm, gosh, wonder what might influence that. Could it be the \”financial resources to offset that loss\”?
You know, savings?
In the first month that the BEA (Bureau of Economic Analysis) provided us with data (January 1959), the personal savings rate in the United States was 8.3%. So, this means that, on average, Americans were able to save 8.3% of their disposable incomes. ……..By January 2000, the average savings rate was 3.5% – it would end up falling below 1.0% multiple times between 2000 and 2010.
When the economy nearly collapsed in 2008, the savings rate started to trend higher, moving from 1.3% in January of 2008 to 4.2% in December of 2009.
Why the dramatic drop in the average rate of savings between 1990 and 2008?
Yup. Looks like it, doesn\’t it?
So, our measure of \”economic insecurity\” is really a proxy for a falling savings ratio. And, umm, is anyone suggesting that the cure might be more savings?
No, not really, everyone is screaming about how we\’ve got to get consumption moving again, aren\’t they? You know, this stimulus stuff?