90's Bull Market Due to Decreased Savings Rate ?

Discussion in 'Economics' started by fiveOmar, May 21, 2005.

  1. fiveOmar


    Thats what I think is responsible for the economic boom of the 90s.

    More people spent their money on [unnecessary] goods, a part of it due to the ease and availability of credit from banks and credit cards. More spending = higher sales and growth for many companies. This increased spending (demand) also drove the technology advances.

    While it was great for the economy at the time, it wasn't healthy for society and has little benefit for the economy in the long run (if the trend changes where people start saving more and are more financially responsible, I think that would hurt our economy).

    Here is a graph:

    <img src="http://msnbcmedia.msn.com/i/msnbc/Components/Art/BUSINESS/050520/Chart_PersonalSavings2_05052.gif">

    This is just my opinion, what do you think?
  2. izeickl


    While not sure if this could be the only thing to explain it, I do agree its part of major contribution.
    I think the same can be seen in the likes of the UK, debt and credit is what is fueling continued consumer purchases and house price increases, also the debt taken out is taxed (at least in the UK by things such as Value added tax on purchases, house stamp duty etc) thus helping government coffers E.g with UK debt consumer debt passing the trillion pound mark all those billions extra of debt that is spent are taxed at 17.5% on most purchases. While I dont know what will happen or when, surely it cant go on? Like the .coms that never made a profit yet traded at hugely inflated prices, at some point in time you have to pay the piper!

    South Korea is suffering consequences from opening credit card to the masses also. And in the Asian Times article it indicates that part of the reason Asia boomed after the huge 97 crash is due to public spending on debt when they libererlised credit laws.



  3. TGregg


    They always calc savings as a percent of "disposable income". Dunno about you, but there's no part of my income I consider disposable. ;) Seriously though, what is that? Gross income after taxes and whatever you spent making the income?

    And does this "savings rate" take into account 401Ks (including employer matching), Roths, etc? I wouldn't be surprised to learn those programs don't count as "saving". Perhaps "saving" means dumping money into the bank in CDs and savings accounts. If so, it's no wonder there's less of it. It's way easier, safer and way, way cheaper for Joe SixPack to put his money to work for him in better ways than earning half a point in the local credit union. Just 10 years ago, you had to be an insider to buy on the bid or sell at the ask. And the commissions, man brokers were raping their customers (without vaseline) compared to today.

    30 years ago, my parents and grandparents considered CDs to be the main way to put money to work. Today that's a joke. Today the average person is much more knowledgeable about finance, and if he's not he's got cheap access to that knowledge. So more folks are using that knowledge to make their money work harder.
  4. Fools!