Why Don't Americans Save More?

By Grant Davies

Recent developments caused by the Congress, the President, and the Supreme Court may have changed things for the country in a fundamental way. Having said that, some things never change.

The laws of economics are such things. And since the study of economics is fundamentally about how people respond to different stimuli and the choices they make because of them, a discussion about unchangeable things is appropriate now.

The following TV exchange took place recently and our friend Dan Mitchell posted this video on his blog, International Liberty, along with the accompanying excellent commentary concerning the points he made.

You can read the whole post here. My own comments can be found below the video.

Excellent points and well made. I would take this opportunity however to make an additional point which Dan possibly didn't have time to raise during a short TV spot. Or perhaps he disagrees and therefore didn't make the point purposely. (Dan has a PHD in economics and I got a "C" in high school Econ 101, so enough said about that.)

My point is:

Even in the current low inflation environment (on a relative basis) the value of the currency has declined steadily and can be expected to deteriorate much more quickly in the future as the velocity of money movement causes the Fed’s printing to cause a much more virulent inflationary cycle.

That money devaluation does not encourage saving, but rather consumption, as people realize that the value of their savings is declining faster than the paltry interest earnings can keep pace with.

It’s only one more way that the government has changed the culture for average Americans and encouraged financial behavior that is deleterious for them over the longer term.

(I’m not an economist, but I sometimes pretend I am one on this blog.)

This article was originally published at WhatWeThinkAndWhy.


  1. I don't save more because everything I save is taken away from me in taxes. I actually do work hard, budget carefully, and build up a savings account, then when tax time comes, the account's empty again. Most of my income is from self-employment, so even though I'm not in a high tax bracket, about 1/6 of my income disappears in the form of Social Security tax right off the top. That and the other multitude of taxes I pay in one form or another (whether called taxes or fees or penalties) may (or may not) leave me with enough to live on, but it certainly doesn't leave me anything in my savings account at the end of the year.

  2. We set 15% of our gross aside for retirement and if it weren't for two kids in college, we'd do more. I think it's easy to get worked up about current events and lose track of the simple things. No matter who is doing what on the macro scale, it's still best if you save money, stay married, cultivate valuable skills, exercise self-denial and acknowledge a power greater than yourself.

    By the way, if you're not the kind who is big on organized religion, may we recommend the Feline Theocracy?


    1. I'll take the Feline Theocracy over organized religion ny day of the week!

  3. Don't Save. Drink.

    The Official Beer Of The Revolution

    "If ye love wealth better than liberty, the tranquillity of servitude than the animating contest of freedom—go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that ye were our countrymen!" Samuel Adams

    1. Sam Adams Light is my favorite beer. I like all the rest of the Sam brews as well. I also think we should drink.

  4. Does anyone have any ideas besides putting it in a savings account right now? Gold is already really high, I believe stocks might take another dip, and i'm not sure about these annuities...

    1. This is not a recommendation for any investment, but "really high" is not a price level. "High" is a relative term. And when comparing a current price with a past price one must realize that the only thing that matters is whether it is high relative to where it will be, not where it has been.

      As I said in the article, I'm not an economist. But I am an investment advisor. At least I was, I'm retired now.

      No one has a working crystal ball, so predicting the future is merely guessing. Having said that, I would be looking for investments which will compensate for the falling value of the currency. Things that retain real value when the fiat money becomes worth less.

      Perhaps precious metals, perhaps a stable currency... if you can find one.

  5. Invest in guns and ammunition. There will always be a demand for guns and ammunition.
    And doughnuts. Civilization would collapse without doughnuts.

  6. While I believe that Gold will go straight up for the remainder of the year, the most valuable commodity for the "zombie apocalype" is toilet paper. 8)


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