Full text: Capital Gains, Pension Funds and the Low Savings Ratio in the United States

indebtedness I have expressed the increment of liabilities in p.c. 
of the increment in assets of households as given by the flow of 
funds (Table 5).It is not very clear whether there is any long 
terra trend. What the figures impress on us most definitely is the 
fact that indebtedness declines sharply in recession and increases 
in the boom:Thus from a low in 1981 and 1982 it rose to high 
levels in 1985 and 1986. The net saving therefore is high in the 
recession - the figures for 1974 and 1975 are not a good basis for 
comparison with the present - and it is low in the boom such as 
1985 and 86. This cyclical pattern,due to the increased importance 
of consumer durables and debt which behave rather like business 
investment,has been stressed before ( Steindl 1982 ). 
If we add the gross saving rate (from table 6) to the borrowing of 
households (line 8 of table 5) to obtain the saving rate gross of 
new debt we find that this shows a pro-cyclical pattern. Should we 
add the 2 to 2.5 p.c. underestimate earlier mentioned to the 
figures for the latest years we would find no negative trend in 
this gross saving ratio. 
Thus what remains of the low saving ratio is the strong 
disposition of the consumers of the 80s to indebt themselves. Even 
though they only followed the example of corporations and the 
government in this respect their behaviour met with strong 
disapproval by economists. My own appraisal is different from that 
of most of the other commentators. I think that the increased 
consumer borrowing has been the main support of the long boom 
lasting from 1983 to recently. Indeed where else could the demand 
have come from? Private investment has not increased very much 
during the boom. The large budget deficit which is often quoted as 
an explanation is hardly more than sufficient to offset the 
depressing influence of the state and local surplusses and of the

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