Saturday, September 12, 2009

The spike in savings rate and wealth destruction

The spike in savings rate is clearly linked to the recent household wealth destruction. The chart below shows just how steep the decline in net worth has been.

The housing bubble caused such a rapid spike in household wealth, that the consumer simply gave up on savings altogether. According to the chart, almost two decades of net worth growth had been wiped out. The savings rate now is a desperate attempt to try to rebuild some of that lost household value.

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