|Personal Savings Rate & Current Account Balance. Source: FRED|
Arguing for a decline in the personal savings rate means--by definition--an increase in the rate of growth of one or more of the following in excess of the rate of growth in personal income:
- Corporate savings (profits - dividends)
- Government savings (budget balance)
- Foreign savings (current account deficit)
Although the causality is bidirectional, the savings rate is intimately tied to the balance of payments by the accounting entity CA= NS-NI (Current Account Surplus = National Savings - National Investment). As such, a revisiting of the low savings rates associated with the 2000s would need to be coincident with a much much larger current account deficit and tighter fiscal policy. The main driver in the 2000s for this were the so-called "Clinton surplus" followed by the large current account deficit.
There is quite a few reasons to be bullish on increases in nominal final demand, but a decline in the personal savings rate is not one of them. The gap in quality between the mean and median household balance sheets (wealth skew) has probably peaked and is headed nowhere but down. As I have said before, the accumulated stock of corporate sector savings is about to be transferred to the household and public sectors.