There are a lot of great economics blogs that are not on our blogroll. For example, there is David Altig's Macroblog, which I had not heard of until today, when Altig was paired with Alex Tabarrok (of Marginal Revolution in the latest WSJ Celebrity Death Match, this one concerning saving.
Other bloggers that I have stumbled upon recently include William Polley and Brad Setser.
I think that my tendency is to underplay macroeconomic issues, which is why these folks are not on my radar.
In the WSJ piece, Altig writes
The Thaler-Benartzi "Save More Tomorrow" results are intriguing, and about as close to a free lunch as it gets. If more information and better options are all it takes to turn us into a collective of willingly thrifty little ants, I'd say we are nearly home free.
But do you think that is really the issue? Have Americans become less informed and more constrained over the past twenty years? The really dramatic break in the pattern of the private saving sure gives the whiff of a smoking gun.
But where is it?
Basically, when the measured saving rate falls, you have two choices. You can say that behavior changed, or you can say that measured savings changed in some systematic way relative to "true" saving.
It seems to me that if we're going to explain the drop in measured saving as being due to an increase in stock market wealth in the '80's and '90's, then it sort of begs the question why measured saving did not surge after the dotcom crash.
For Discussion. Has personal wealth recovered from the stock market crash of 2000-2001?
For the most part yes. In fact, a properly diversified stock portfolio (allocations to different market caps, international, and styles such as value and growth) should be positive for the past 5 years. Too many people only look at the S&P500, the Dow or NASDAQ to measure results.
Several asset classes such as mid-caps, and small-caps have done extrememly well over the past 5 years. Example, small value stocks have averaged returns of 18+% over the past 5 years.
In my company's division we have looked participant account balances (large 401k's) and most have recovered. Around 20% never lost ground due to cash positions (above market cash returns in stable value funds).
Many bond classes have fared well over this period too.
Of course, those silly enough to bet the bank on tech stocks or a single index are not happy campers.
What you need to do is look at both stock holding and home values in looking at the question of the impact of wealth on savings. For the most part the negative impact of stock holding has been offset by the soaring value of homes so the combined impact of the two items and been what has driven the drop in savings.
The really key point in the study is that the drop in savings has been among the really higher income groups, the segment where stock holdings are concentrated. Even though over 50% of households now own stocks -- a big rise over the past decade -- most household stock holdings are very small and by value stock ownership is still extremely concentrated among the most properous
segment of the population.
Did it ever suffer a loss? Nominal losses mean nothing without loss of placement or market position. There was no jumping out of windows with the last Recession. lgl