CHART: Why Savers Are Furious In America

Combing through the personal income and spending data (which was released yesterday) reveals all kinds of interesting nuggets.

For example, we observed the big surge in rental income in America, thanks to a surge in both rent prices, and the number of people who are renting homes, rather than buying them.

And then also the data reveals that the savings rate is back to collapsing.

Anyway, here’s another fun one. Check out income earned from interest as a percentage of GDP.

chart

As rates have declined, interest income as a total share of the economy is back to levels not seen since the early 70s.

It’s interesting to compare this chart with 10-year yields.

chart

As you can see, interest income as a share of the total economy actually stayed pretty high throughout all of the 80s, even as rates dropped precipitously. And through rates are at all time lows, interest income isn’t quite there yet. But for savers and retirees, the trend is still not looking good.

And though people blast Bernanke for a policy of zero interest rates, that’s misguided. It’s the massive glut of savings (people wanting risk-free assets all around the world) and the still-poor growth prospects that conspire to make a scenario where you can’t earn any money on your cash.

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