Yet Another Recession Red Flag: Net Saving Is Negative

[Ptarmigan]

Yet Another Recession Red Flag: Net Saving Is Negative
https://mises.org/power-market/yet-another-recession-red-flag-net-saving-negative

Net saving as a percentage of gross national income has been negative since the first quarter of 2023. The current period of negative net savings is only the third time that net saving has gone negative in more than 75 years. Looking back to the late 1940s, we find that the overall trend in net saving increased during the post-war period of economic retrenchment in the 1950s and early 60s. With the Guns and Butter era of the late 1960s, however, net saving went into decline, and the general downward trend has continued ever since, following a similar trend to mounting federal deficits.



The only other times net saving has gone negative is in the lead-up to the great recession, and during the covid recession. In general, net saving tends to fall steeply in the early periods of recessions, and this can be seen in the graph, going back several cycles. (A similar trend exists for gross saving as a percent of GNI.) This likely reflects a few different trends, one being the fact that the federal government continues to go more deeply into the red when tax revenues are weak as they are now.

Savings are in negative territory. That could mean a recession is about to happen.

[fatboy]

It's as if the overall economy is being held together by Silly Putty. As is well known the treasury bond market is inverted has been since mid-2022. Checking on Treasury Direct today a 90 day note is really the best about 5.4% but on my brokerage account I have a money market that yields 5.3% with no minimum and stays liquid. And yet the S & P 500 sits at 4800 with no rational reason for this except the assumption the Fed is going to start reducing rates soon. The consumer is feeling sassy but as the chart above it's at the expense of any kind of savings.

We are screwed so bad, it's only going to take one thing to cause the whole house of cards to collapse.

BTW, unrelated but the new Bitcoin ETFs look like the bomb. Or shall I say bombing out.