III - National Savings

SAVINGS, INVESTMENT & DEBT OWNERSHIP

	SAVINGS, INVESTMENT AND DEBT OWNERSHIP Individuals and businesses seek to increase their assets through savings and investments. They also borrow to purchase assets or finance business opportunities. The financial services industry exists to manage these activities by bringing savers, investors and borrowers together, a process known as financial intermediation. The banking industry acts as an intermediary by taking deposits and lending funds to those who need credit. The securities industry acts as an intermediary by facilitating the process of buying and selling corporate debt and equity to investors. Finance companies provide credit to both individuals and businesses, funded in large part by issuing bonds, asset-backed securities and commercial paper. The insurance industry safeguards the assets of its policyholders, investing the premiums it collects in corporate and government securities.

	NATIONAL SAVINGS Gross national savings is the excess of production over cost, or earnings over spending. Gross national savings grew in the late 1990s, fueled largely by increased saving on the part of federal, state and local governments, but fell in the three years, 2001 to 2003 and again in 2007. Beginning in 2002, total government saving turned negative due to federal personal income tax refunds and rising expenditures at all levels of government. In 2007 governments spent $230 billion more than they received, compared with $195 billion in 2006. Personal saving—the excess of personal disposable income over spending—declined dramatically from $181.7 billion in 2004 to $44.6 billion in 2005, and fell further to $38.8 billion in 2006. In 2007, personal saving rose to $47.8 billion, but was still far below the peak of $299.4 billion reached in 1990.

	GROSS NATIONAL SAVINGS, 1940-2007 ($ billions) (1) Includes individuals (including proprietors and partnerships), nonprofit institutions primarily serving individuals, life insurance carriers and miscellaneous entities. Source: U.S. Department of Commerce, Bureau of Economic Analysis.