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April 05, 2005

Comments

dearieme

What do you make of Tim Congdon's argument in this morning's Telegraph? He thinks that people attach far too much importance to the "household saving ratio".

chris

Tim makes many good points - especially about the rationality of households. In my day job, I've been very sceptical about the notion of a savings gap.
His point about the stability of aggregate national savings is consistent with Ricardian equivalence; usually, people save when governments don't and vice versa, making aggregate savings smooth. However, right now aggregate savings are at the bottom end of the 15-18 per cent range Tim mentions. And a huge chunk of savings are companies' retained profits. So his story is compatible with mine; firms are saving, maybe in anticipation of higher taxes, but households aren't.

dearieme

Thanks. If I am a shareholder, why do I want those company executives saving for me: wouldn't I prefer to get the dividends and save for myself, or not as the case might be?

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