This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
4/13/2007
Low saving rate in U.S. seen as danger
A recent article entitled “Low saving rate in U.S. seen as danger” the European Union’s monetary chief said “the United States low savings rate and large budget deficit pose a risk to the global economy”. He went on to say that “the world’s largest economic powers should take advantage of current prosperity to reform their economic policies”. I completely agree with the European Union’s monetary chief’s statement. I think running a deficit should be reserved for recessions. The United States should run a surplus during times of economic growth such as now.
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2 comments:
This is clearly a danger to the economy. We know that income is a factor that can shift the demand curve and I would say that our savings rate is also a factor that can shift it. Demand for expensive items like homes, cars, or new appliances often need to be paid for (or at least down payments made) out of individual savings. If we don't have savings to help pay for these things, then that will shift the demand the curve for these items. Housing is such a big part of the economy that when that sectors slows it slows the whole thing. Part of the problem with the current downturn could be related to lack of savings to buy houses, especially since the lenders are being more picky about who to lend money to.
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