Given that the Roaring Twenties were a time of speculation and excess, I wondered how personal savings rates compared with today.
The personal savings rate (“national income and product accounts of the United States”, or “NIPA”) was 4.5% in 1929.
It rose as high as 26.1% in 1944.
Now let’s fast forward to right before the current crash . . .
NIPA was below 1% for most of 2007.
In other words, not only may this crisis be more severe than the Great Depression, but Americans are less prepared for it, because they’ve squirreled away less savings.
Indeed, a new report shows that most baby boomers have accumulated little to no wealth.
Our savings is also dramatically lower than Japan’s when that country entered into its Lost Decade. So the Japanese were much better prepared than we are.
Of course, the American economy as a whole was also a lot stronger in 1929 than before the current crash.