Saturday, April 18, 2015

Still looking for Savings

The other day I wrote:

Do we have a vast quantity of savings stored up? You know we do.

I don't like that. I don't like pretending innuendo is evidence. Maybe it bothered you, too. (I hope so!) I wanted to show vast savings on a graph. But that wasn't as easy to find as I thought. That day, I skipped the graph.

I looked on Friday, but did not find. I'm looking again today, and today I will take a different approach to the problem. I will wander from FRED. I will see what other people have to say.

I remember Steve Roth a while back offering a definition of "money":
I’ve bruited the notion in the past that “money” should be technically defined, as a term of art, as “the exchange value embodied in financial assets.”

In this definition, counterintuitively relative to the vernacular, dollar bills aren’t money. They’re embodiments of money, as are checking-account balances, stocks, bonds, etc. etc...

If this definition is safe, then the stock of money (I hate the term “money supply,” which suggests a flow) equals the total value of financial assets. Forget the endless wrangling about monetary base, M1, M2, divisias, and all that. Add up the value of all financial assets, and that’s the money stock.

I wasn't happy with that definition of money, then. But maybe I can use it now. It's a very very "broad" definition of money -- and when you're pondering savings, a broad measure is the right one to use.

Roth shows graphs of Total Assets as a proxy for the stock of broad money. I like that approach. It gives me numbers to work with.

It's also the biggest money measure that comes to mind. That's why I want to use it here. From it I want to subtract the portion of money that is commonly used for transactions -- the part that I see as "money" -- and consider the rest to be savings. By this method I may arrive at a measure of savings, the biggest measure of savings that I can come up with. You know: vast savings.

I found a few links to estimates of total accumulated savings. Most of 'em, unfortunately, are like this:

Gross savings (plural) figured as the part of Gross Domestic Income that we don't spend. That's a flow, dammit. STF might call it Gross saving [singular]. We were looking at Gross savings in yesterday's post, trying to trust that it is a stock, without success. Maybe now we know why.

Here's a World Bank link on Gross Savings. Shows the same definition as the indexmundi clip. Their Gross Savings numbers for the U.S. are $2.38 Trillion (2010), $2.45 Trillion (2011), $2.7 Trillion (2012), and $2.91 Trillion (2013).

The useful "Total Assets" links I found are shown next, in date order:

Rutledge Capital - May 24, 2009: Total Assets = $188 Trillion as of 2008Q4.

Yahoo Finance - October 22, 2013: Total Assets = $225 Trillion as of 2012Q3.

Wikipedia - April 17, 2015: Total Assets = $269.6 Trillion as of 2014Q1.

That's about it, really. Maybe you can find more?

Hey, since we can now draw lines on FRED graphs, I'm gonna show GDP and add this Total Asset data to the graph!

Graph #1: GDP (blue) and Total US Assets (red)


Friggin Wikipedia!

At the Financial position of the United States page that I linked above, among the graphs on the right side is a green one, Assets of the United States as a fraction of GDP 1960-2008. Clicking that brings up a bigger image along with related data.

The graph is by Equilibrium007, who would get the Arthurian Prize of the Day, if there was one.

I clicked More Details. Below the graph is a Summary section, where the Description includes a link to the source data. Clicking that brings up a page of the Fed's Data Download Program -- somewhere I've never been before. There is a package of 16 data series there, for download or review.

See how easy it was, to find all that data!!!

But, you know, I'm not so sure now that I want to take Total Assets, or even Total Financial Assets, and say that it's a good proxy for vast accumulated savings.

A lot of financial assets, most of 'em maybe, were not created by saving. They were created by borrowers and lenders reaching agreements that create money from nothing.

It doesn't worry me that they create money from nothing. But we surely cannot then turn around and say the assets were created by acts of saving.

If I go to the bank and borrow $1000, and the bank creates the money by depositing it in my account, there was certainly no saving that accumulated to $1000 so that I could borrow it. Maybe it's true, I think it is quite definitely true, that after I borrow the money and spend it, it soon finds its way into savings. So there is going to be a relation between savings and assets like loans, anyway. And that might be a useful relation to look at. But I don't think it's correct to look at assets and say there was that much accumulated savings -- nor even that there is going to be that much accumulated savings. It just doesn't sit right.

My attempt to use Total Assets as a measure of accumulated savings was wrong-headed.

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