This Is What the Global Savings Crash Looks Like

The news of Spain's deep mortgage woes reminded me to pass along this graph below. We often hear about the United States' consumer burdening herself with credit card debt in the last few decades, as though we were globally unique. But the truth is that household saving plummeted throughout the world in the last 30 years, in almost all developed countries -- with and without value-added taxes, with and without Fannie Mae's.

Here's the graph, courtesy of the McKinsey Global Institute:

International savings country.pngSavings in this graph fell in the United States, from 10 percent to nearly zero. But following us down the rabbit hole of debt were Canada, Australia, Japan, and the UK. Notably, the savings rate in Germany -- which is coming off an enviably super-charged third quarter -- continues to outstrip much of the developed world.

What's so great about savings? High debt among households and banks creates a hole in the economy. Fiscal stimulus has a high bar, because Americans will spend their next checks to spend down debt rather than buy new stuff. Monetary stimulus can only do so much, because even after you've cured the liquidity crisis, banks will still be shy about dangerous lending while the economy tip-toes toward recovery. A low-savings/high-debt recession, or a "balance sheet recession," is especially tricky to get out of.

So it is notable that in October 2010, about a year after the nadir of our credit crash, the two countries with the fastest-rebounding and highest-performing business indices in Western Europe are the same countries that went into the crisis with the the highest savings rates: France and Germany.


Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

Video

Pittsburgh: 'Better Than You Thought'

How Steel City became a bikeable, walkable paradise

Video

A Four-Dimensional Tour of Boston

In this groundbreaking video, time moves at multiple speeds within a single frame.

Video

Who Made Pop Music So Repetitive? You Did.

If pop music is too homogenous, that's because listeners want it that way.

More in Business

Just In