I heard the term on a recent radio report, which stated that 2005 was the first year since the Great Depression in which Americans, as a whole, had a negative savings rate. What I would like to know–and leave a comment if you think you know the answer–is why the fact that 2005 was the first year in which Americans spent more money than they earned was phrased in such a strange way.
Negative savings rate? Is that a poor attempt to make a straightforward point in a way that is intended to sound more intelligent? Is it a deliberate attempt to confuse? Is it a way to try to make the fact that Americans spent more money than they saved, which is clearly a negative event, into a perceived positive since negative savings rate doesn’t sound that bad? It’s a savings rate, which is good, but it’s not a positive one.
All I know is that I had the absence of a positive reaction when I heard it.
Paul’s book–Literally, the Best Language Book Ever;
Savings rate, much like disposable income or interest rate, is a standard economic metric. No one was attempting to make a point with the phrasing. The value for the savings rate is the result of a formula, and that value just happened to be negative. It’s just math.
Reply from Paul: It may be a standard economic metric; however, I don’t know if the person who made the statement on the radio was attempting to make a point with the phrasing or not. His intention is unknown to me.
Math or not, “negative savings” sounds strange. When something is saved doesn’t that mean it’s being accumulated? Assume my savings account had a balance of $150 at the end of June and at the end of July the balance was $100. The “math” tells me I negatively saved $50. Most normal people would simply say I lost money.
Actually, what it means is not that “Americans spent more money than they saved,” but that they spent more money than they EARNED. Meaning, you earn $100, but spend $125. You could have taken the $25 out of your savings to spend it, or put it on a credit card. That the whole nation is doing this is, to me, a little scary.
The reason for using that particular phrase “savings rate” (which in my opinion should be explained when used) is it allows you to make an apples-to-apples comparison to other years and know you’re talking about the same thing.