Part IV of the series
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- Deficit was strongly on the rise from 2001 - and peaked towards 2004.
- Savings rate remained at about the 2.00% area between Q3 2000 and Q2 2002.A small decline in savings rate that started in Q2 2002 went into a sharp decline from Q4 2004.
- From the image it looks like the decline in the savings rate led to the rise in external debt as a % of the GDP ( and as a % of the Total Debt).
- The answer to Question 1 ( in part I of series) - Deficit instead of being financed by savings was being financed by a growth in external debt.
- A corollary to this is that savings instead financed GDP. ( answer to Question 2 )
It is always desirable that the deficit should be financed by internal accruals ( including savings) instead of external debt.
As such increasing the savings rate becomes a key component of Monetary policy.
Question 3 : What causes increases/declines in savings rate ?
Also see ( will give indications of the fiscal policies of Republicans versus Democrats )
- USA - Fiscal situation as a percentage of GDP, under the recent four Presidencies ( since 1980 )
- Fiscal Deficit and Savings rate ( since 1981 )
- Relationship between Total Debt ( data from 1929) and External debt as a % of the GDP (data from 1995)
- USA - Relationship between GDP and Savings rate ( Quarterly data since 1985 )