Reference Post: The Principle Of The Opposite
This post is written to respond to questions like long time reader DC asked regarding the referenced post – specifically DC questioned how the savings rate in America increased, regardless of the bond or CD interest rate yields, when "Americans have once again pushed up to record levels of consumer debt."
This is an excellent very intuitive question.
The graphic below shows household saving rates have increased in many countries with low or negative interest rates. The referenced post was written to show that increased savings were being realized in many countries all over the world – not just the U.S. which shows a smaller uptick (really very flat) in household savings rates the past few years than the other countries on the graphic. In brief, the referenced post was talking more about other countries than it was the U.S.
click on graphic to enlarge
The graphic below shows that nonfinancial companies in Europe, the Middle East, & Africa are holding on to cash which was another part of the referenced post.
click on graph to enlarge
Although the U.S. savings rate has not increased as much as the other countries shown on the above graphic has, the following graphics show that student loan debt is the only type of debt that has significantly increased in the U.S in the last several years - surpassing auto loans & credit card debt as indicated. Although students have a tremendous burden in paying off their student loans they will not worry about retirement savings for many years & accordingly are not the people the post was referring to. Click on graphics to enlarge.
A good key to start saving is to reduce existing debt & people who have reduced credit card & home equity debt are in a much better position than they were a few years ago in this regard. But the graphic below shows that America is still debt heavy with almost two thirds of college graduates having student loan debt.
click on graphic to enlarge
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