America’s Saving Rate and the Dollar’s Future
American households' saving rate has increased sharply since the beginning of the year, as falling equity and home prices have rapidly eroded their wealth. But, while that should lead to a lower dollar, which would narrow America's trade deficit and stimulate employment, the sharply higher US fiscal deficit will complicates matters considerably.
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CAMBRIDGE – The saving rate of American households has risen sharply since the beginning of the year, reaching 6.9% of after-tax personal income in May, the highest rate since 1992. In today’s economy, that is equivalent to annual savings of $750 billion.