Full text: Capital Gains, Pension Funds and

As already mentioned in this paper the two systems of data, 
the NIPA and the Flow of Funds, give different estimates 
for the household saving. The difference was formerly 
relatively modest,but in the 1980s the estimates diverged 
very strongly. 
The divergence is identical with the statistical 
discrepancy given in the Flow of Funds which amounted to 
$40 to $90 billions per year in 1980 to 1987 (Table 5).One 
reason for the divergence is the difference between 
benefits (pensions) and investment income of pension funds 
and life insurance companies which amounted to $20 billion 
in 1984 and rose to $35 billion in 1986.This excess of 
benefits reduced the disposable income and saving in NIPA 
but it did not affect the Flow of Funds data,so that saving 
there is correspondingly larger than in NIPA. Another 
reason for the discrepancy may be that NIPA does not take 
account of realised capital gains (they are not income) 
while the Flow of Funds does. Realised capital gains 
accruing to the personal sector have attained an increasing 
importance in the "casino society" of the 1980s.As the 
Survey of Current Business (July 1988,Table 8.15) shows 
they rose from roughly $30 billion in 1981 to $137 in 
1986.The main source of these gains presumably lies in the 
re-purchase of shares at high prices as a consequence of 
take-overs (or of defensive measures by corporations 
threatened by raiders).The stock exchange boom of 1982 - 
1987 has favoured speculative gains as also has the boom in 
real estate.

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