Personal saving -- DPI less personal outlays -- was a negative $119.6 billion in February, compared with a negative $115.1 billion in January. Personal saving as a percentage of disposable personal income was a negative 1.2 percent in February, the same as in January. Negative personal saving reflects personal outlays that exceed disposable personal income. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. [..]
What this data says is simple: in the US we spend more than we make. Therefore, the surplus funds have to come from somewhere. That is usually from previous savings or debt.
Now, there has been a great deal of obfuscation of this statistic from the RWNM, economic division. Their arguments boil down to the following: "We don't like the fact that easy money policies that we promote have led to a dangerous situation, so we'll change the definition so the resulting number won't make our policies look so bad." Let's refute these arguments one at a time. Read on...
By Nicole Belle — April 1, 2007