“The household
saving ratio must therefore be calculated as the
ratio of household saving (B.8 – SNA 93 code)
divided by household disposable income (B.6) plus
the adjustment for the change in net equity of
households in pension funds (D.8). The United
States has chosen not to follow the SNA 93
treatment…Consequently,
the adjustment item is not required and the
traditional definition of the household saving ratio
still applies.”

And a little earlier
“The household saving ratio has traditionally been
defined as household saving divided by household
disposable income.”

So basically it is using the NIPA calculation to determine household savings. Even the federal reserve board says that this way of measuring “savings” is flawed:

“…the NIPA personal
saving rate gives an incomplete picture of household
savings behavior. For example, the NIPA measures
of income and savings exclude the sale of or
change in the market value of existing assets. For
financial assets, personal income does include dividend
and interest income to persons, but excludes
capital gains and losses.”

http://www.frbsf.org/publications/economics/letter/2002/el2002-09.pdf

(Slightly dated, but still useful commentary).

Savings rates might very well have gone down because the savings that were “waiting” for investment are now invested. Perhaps if the tax rate were lower investment would be higher; perhaps not. Either way, I don’t think either Blodget or you can definitively conclude a cause and effect here based on these simple studies.

I’ve been reading your blog for about six months now, and it’s pretty clear you know what you are talking about. Thus, it is disappointing that you have grossly misrepresented Blodget’s article in the way you did. As Amy and Ian have pointed out, Blodget was arguing for a change in the tax system, not telling people to spend all their money. I have not seen you stoop to name calling and political bickering before-what does it accomplish now?

Would you care to cite references for the following statements?

“The reason people spend like gangbusters and don’t save doesn’t have anything to do with capital gains tax.”

“Taxation as a whole has never been lower than it is now since its inception, yet somehow savings rates are at their lowest point, too?”

The article is also ignoring the fact that compared to inflation, taxes aren’t eating much of investment returns at all.

The reason people spend like gangbusters and don’t save doesn’t have anything to do with capital gains tax.

As several of his recent columns show, he promotes long-term, diversified investing:
http://www.slate.com/id/2161304/
http://www.slate.com/id/2160236/

This guy agrees with you.

If you convert those euros back to U.S. dollars, you do owe income tax on the exchange rate gain–it’s not a tax-free gain.

And as js pointed out, some states don’t have a separate lower capital gains rate, so you pay regular income tax rates for the state portion (6.45% in KS). Some states like Mass. do have a lower rate for cap gains (5% last I checked) versus regular income tax. (By the way, I cringe when I here people talk about Taxachusetts–we pay way more in the great red state of Kansas).

If it is also the case that the stuff you buy is losing money even faster than your money, then it still doesn’t make saving a good choice. In that case instead you should spend on assets that don’t lose money – housing, gold, or spend it on experiences like travel. If you can buy more travel or basket weaving classes or whatever with $1000 today than $1000 plus interest 5 years from now then might as well do it now.

I also really don’t understand about capital gains taxes on dividends, some part of arcane tax law I don’t understand I suppose. I thought dividends and capital gains were two different things. Dividends are taxed as regular income, capital gains at 15% (the 15% is not such a deal though when you add to it a near 10% state tax on all income including capital gains, that I’m paying here in CA).

The founders of Moveon.org’s founders are a prime example.

Furthermore, you appear to lack understanding of how an economist conceptualizes spending. Money is not the end product, maximizing utility, broadly understood, is. We save for the future not to get more money, but to ensure that we have money to continue to transform into a utility stream throughout our lives.

Blodget’s thesis is essentially that simple investments barely break even over time because of taxes and inflation, while other investments are often too complex, too costly, or too inflexible to be of use to many Americans. He suggests that creating a more accessible, tax-advantaged savings vehicle would have a positive impact on the savings rate. Would you care to disagree with this?

Incidentally, the authors of Slate pieces don’t choose the titles of their articles, the editors write them with an eye to maximizing clicks. So there’s often a mismatch between the title and the thesis of the article.

If our currency has depreciated with respect to the euro and pound, our imports (from Europe and England) should begin to reduce in number. From the American point of view, European goods will seem more expensive then they were with the more favorable exchange rate. This will cause American consumers to begin looking elsewhere for their goods. Additionally, this will also increase European imports of American items. It’s somewhat of a self-correcting mechanism, theoretically speaking.

More importantly, most of our imports come from Canada, Mexico, China, and Japan. Our exchange rate with each of these countries should be the true measuring stick. If the dollar has depreciated versus all four of the above nations, we should see total American imports begin to decline.

That being said, I agree that exploiting exchange rates for financial gain is an effective strategy.