Marc Abear: Government says Americans have excess savings, no cause for concern

To The Daily Sun,

Inflation is upon us and pandemic stimulus is running dry. It is hard to save money. In April the U.S. personal savings rate fell to 4.4% (data from the Commerce Department). The 4.4% savings rate is the lowest since September 2008 according to Yahoo Finance.

A sharp drop in the savings rate is usually seen as a warning sign, the sustainability of spending is being stretched. The administration however believes balance sheets are in such good shape, there is little cause for concern.

Here’s the thing, the personal savings rate is inversely impacted by the government’s efforts to bolster the economy. So, a decline in the amount of money Americans have been able to save has been expected.

In April 2020, the savings rate hit a record 33.8%. Stimulus checks from the government provided consumers with “relief”. It was a governmental response to government required lockdowns and forced business closures.

Government economists believe: There are trillions of dollars in unused savings. Americans can use them to offset the rapidly increasing number of Americans who aren’t able to save or grow their nest eggs.

They say Americans unable to save their earnings is “no big deal.” The excess savings is still $2.2 trillion, and the depletion rate is averaging about $41 billion/month. So, this can continue for 53 months but it won’t be necessary. Real incomes will rise in the second half of 2022.

The economists note households have accumulated about $2.2 trillion on their balance sheets. Household net worth rose about 30% over the past two years.

The question I have is: How much of that rise in net worth is in inflated home value? Where are you if you don’t own a home? Theirs is a balance sheet answer to an income statement problem. It's not the fall that kills you. It's the sudden stop at the end.

Marc Abear

Meredith