The collapse of the Greek economy is almost without precedent. Real household consumption has dropped by 27 per cent since the peak. During the global financial crisis, this figure “only” fell by 6 per cent before rebounding:
In the latest from Andrew Smithers, our eye was drawn to a line in his gloomy state of the world summary, that the UK economy is driven by an unsustainable fall in household savings.
What it turns out we had not been paying attention to lately is the fact that the UK household saving rate is the worst among the developed economies apart from Japan, where a dip into negative territory has some investors nervously (gleefully?) eyeing the sovereign debt load. Read more
Households are putting more money aside in tax-free savings accounts than ever before, despite rising domestic bills and stagnant wage growth. The number of active Individual Savings Accounts (Isas), rose to 15.3m in 2010-11, the highest figure since Isas were first launched in 1999, according to FT analysis of data from HM Revenue & Customs. Economists said the repercussions for the wider economy could be negative if households were opting to save rather than spend. However, the overall picture on savings is mixed, suggesting it is the relative competitiveness of Isas compared with other forms of saving, which has boosted their take-up.
Crude oil doesn’t necessarily spring to mind when one thinks of natural wealth redistributors.
Yet in 2010 the transfer of income from oil-importing countries to oil-exporting countries amounted to some $1,600bn — or 2.6 per cent of the importers’ GDP. With oil prices now hovering around $110 a barrel that redistribution will only increase. The barrel bill, so to speak, is about to get bigger. Read more
What impact did the crisis have on the attitudes of American families toward financial risk?
A paper published last week by the Federal Reserve, and cited in a speech by Elizabeth Duke on Thuesday, begins to answer this question by looking at how US households’ wealth, savings and expectations changed between 2007 and 2009. The researchers conducted a follow-up survey in 2009 of families analysed as part of the Survey of Consumer Finances (SCF) in 2007. Nearly 89 per cent of 2007 participants were re-interviewed. Read more
Nomura’s Richard Koo — he of ‘balance sheet recession’ fame — has been inspired.
He’s spent a week with Chi Hung Kwan, of the Nomura Institute of Capital Markets Research and an all-around China expert, and come back with the discovery that the “conventional wisdom on [the] Chinese economy has begun to collapse.” Read more
Japan has just announced that its national savings rate rose to 5 per cent in 2009, from 2.2 per cent in 2008. But already some analysts are predicting a sharp reversal in the trend. Goldman Sachs’ Chiwoong Lee thinks the rate is about to turn negative.
From a Monday note: Read more
Given the politics of the moment, the compromise deal on extending the Bush tax cuts was an all-or-nothing proposition. Either Republicans and Democrats would get everything they wanted (of the things that mattered), or everyone would leave empty-handed.
Obviously we ended up with the former. Read more
Paging Martin Wolf. Given recent coverage of global imbalances stalking the market and, uh, teenager-backed bonds on FT Alphaville, here’s an intriguing Goldman note on the role of demographic factors in future current account imbalances.
Intriguing, because the imbalances look like they’re going to get a bit sharper, much sooner — and with a much more middle-aged appearance. Read more
One of the most striking shifts in the deployment of capital on the American and Asian sides of the Pacific has been occurring quietly and with relatively little comment in the past year – a surge in America’s notoriously low savings rates and a slide in Japan’s traditionally stratospheric savings rates. As the FT reports on Thursday:
US retail investors flee to savings
US retail investors poured close to $250bn (€184bn) into bank accounts in the first months of this year, sharply accelerating a flight to safety as they continued to flee volatile stock markets. Bank savings deposits rose by $246bn to a record $4,343bn in the nine weeks to March 9, according to data from the Federal Reserve. This is more than the whole of 2008, in which savings deposits rose by $229bn.