Comments: Stock markets, savings and interest rates

On the personal savings side, the way in which debt repayments and savings are conflated is very unhelpful.

The high savings ratio when mortgage interest rates were 15% is just saying that debt repayments at 15% interest were a high proportion of disposable income - and at the margin, unsupportably high resulting in repossessions. Therefore Andrew Sentance's policy of raising interest rates is likely to produce an increase in the personal savings ratio, associated with a decline in the purchase of financial instruments and what many readers would see as savings - i.e. savings ahead of purchase or to smooth consumption.

Company saving is of course partly pension fund contributions rather than saving for investment. It would be nice to know what the effect of these two factors on savings as considered in national accounts terms is, and therefore what the trends in other savings might be.

Posted by Paul Bivand at March 16, 2007 11:54 AM