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> While it is true that the US savings rate is negative, it is at least
> partially because money invested in the equity market is not counted in
> savings. Most 401Ks are near 100% in stocks.
Steve, you're letting the truth get in the way of a great gloom and doom
thread this list has going! As you've suggested, the only reason the
savings rate is negative is because of the way the figure is calculated. In
its simplest form, the equation is Savings = Income - Spending - Taxes Paid.
Now, not only does the government NOT include capital gains with income, but
it DOES include capital gains taxes with Taxes Paid. This means the shift
into stocks has a "double negative" on the savings rate.
Another way to see just how warped this logic is is to assume for a second
that CEOs, rather than rewarding stockholders through higher share prices
(by buying back stock), paid out higher and higher dividends to them. Since
dividend income IS included with other income in the equation, the US
savings rate would have increased, even though nothing had really changed!
Bruce
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