On Feb 6, 2007, at 10:54 AM, Michael Perelman wrote:
Aren't there two questions here? If Bill Gates built on a spending
spree with Warren
Buffett, they might make a dent on the savings rate. If two
working stiffs get a
drink, they won't.
On the other hand, if some working-class guy gets a subprime loan,
it might not make
a big change in the savings rate, but if too many poor people get
over extended, I
don't think that they economic affect would be negligible.
I don't know of any more recent evidence, but this is from the 2001
Federal Reserve working paper by Maki and Palumbo <http://
www.federalreserve.gov/pubs/feds/2001/200121/200121pap.pdf>:
"Looking first at the income-quintile cohort data, both panels of
table 2 show that, between 1992 and 2000, families in the uppermost
20 percent of the income distribution experienced by a wide margin
the sharpest increases in net worth-income ratios and decreases in
saving rates compared with families in the lower 80 percent of the
income distribution. Families at the top of the income distribution
began the 1990s with considerably higher saving rates than other
families-- 8-1/2 percent in column (C) of panel A. However, saving
rates among the richest households fell so rapidly during the decade--
about 10-1/2 percentage points according to the difference between
columns (C) and (D) in panel A--that by 2000 they represented the
only income group whose spending exceeded their disposable income (a
saving rate of -2.1 percent). Families between the 60th and 80th
percentiles of the income distribution mildly decreased their rates
of saving, as they benefited from moderately higher net worth-income
ratios over the 1990s, while both the saving rates and net worth-
income ratios were essentially flat, on balance, between 1992 and
2000 among families in the middle income quintile. Meanwhile, among
families in the lowest 40 percent of the income distribution, saving
rates actually rose noticeably--they nearly doubled between 1992 and
2000--and by 2000 these relatively poor families were saving at
considerably higher rates than other American households."
