Monday, May 18, 2009

No wonder why we see bubbles in financial markets.

Here is an article written  about 18 months ago that was justifying the low personal saving rate in the US using the argument that the standard national accounts' measure of the saving rate did not take into account the increases in wealth associated to rising asset prices. The article was written in September 2007 right before the crisis started. It was written by David Malpass, who was at that point chief global economist for Bear Sterns. That increase in wealth is gone (and so is Bear Stearns).

Antonio Fatás