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Domestic private savings

Capital formation essential for economic growth must be financed by savings from some source: public savings, foreign savings or domestic private savings. Mobilization of public savings requires a well-functioning tax system. We have seen, however, that a part of any increase in public sector savings gathered by government taxes will come at the expense of private savings: as much as 50%, according to some studies. Foreign savings (foreign investment and/or foreign aid) are difficult to mobilize on an ongoing basis. Most countries seeking economic growth must therefore place strong reliance on domestic private savings for financing domestic capital formation.

Components of domestic private savings

We first consider private household savings. Household savings includes savings in unincorporated enterprises (proprietorships, partnerships). In fact, small and medium sized private firms have been a substantial source of investment finance in many emerging nations. In the past few decades – these same enterprises typically provide the lion’s share of growth in jobs , as in the U.S., Germany and Korea 1960-1995. Worldwide smaller scale enterprises were responsible for 80% of employment in the three decades prior to 2010.

Consider the following taxonomy of domestic private savings (recall, saving is simply not consumption).

  1. Developed Nations – Domestic Private Savings are dominated by:
    1. Time Deposits (Saving Accounts).
    2. Bonds (Debt Instruments).
      • Corporate Bonds
      • Government Bonds
    3. Stocks (Equity Instruments).
    4. On occasion Social Security. Not in the U.S., because U.S. Social Security system is a pay as you go system. So the U.S. Social Security system is not funded. Systems used in Singapore and Chile are funded and therefore are components of savings.
    5. Corporate Savings (Retained Earnings of Corporations). This is Net Income after tax income not paid out as Corporate Dividends).
    6. Accumulated Net Wealth in Housing.
    7. Whole Life Insurance Policies.
    8. Durable Goods. Physical Assets with useful lives greater than one year.

Developing countries

Private Savings in emerging nations consist mainly of categories #1, #5, #6 and #7, with some twists. In the past categories #2 and #3 in past (Bonds, Stocks) were not all that important in emerging nations because the organized financial system in emerging nations is not usually that well developed. However with growing capital mobility this is changing. Category #8 durable goods is interesting. In rich countries one rarely considers purchases of laptops as an act of savings. But it is non-consumption in any context? It generates future income, for many households (not all, of course).

We first provide some perspective on private savings by examining the U.S. experience since 1960.

..

In some recent years net private savings was negative in the U.S.

2005 -2.6%
2006 -3.8%
2007 -2.4%
2008 +1.6%
2009 +7.7%

So now something very interesting happened to private savings in U.S. after 2007. 2007 was the very year the financial meltdown started, beginning the so-called “great recession”. In the U.S. in 2007, net private savings turned positive for the first time in fifteen years. Net private U.S. savings in 2007 were 1.6% of GDP. And in 2008, U.S. private savings, as % of GDP was 7.7%, and rose further by 2010.

Questions & Answers

where we get a research paper on Nano chemistry....?
Maira Reply
what are the products of Nano chemistry?
Maira Reply
There are lots of products of nano chemistry... Like nano coatings.....carbon fiber.. And lots of others..
learn
Even nanotechnology is pretty much all about chemistry... Its the chemistry on quantum or atomic level
learn
Google
da
no nanotechnology is also a part of physics and maths it requires angle formulas and some pressure regarding concepts
Bhagvanji
hey
Giriraj
Preparation and Applications of Nanomaterial for Drug Delivery
Hafiz Reply
revolt
da
Application of nanotechnology in medicine
what is variations in raman spectra for nanomaterials
Jyoti Reply
I only see partial conversation and what's the question here!
Crow Reply
what about nanotechnology for water purification
RAW Reply
please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment.
Damian
yes that's correct
Professor
I think
Professor
Nasa has use it in the 60's, copper as water purification in the moon travel.
Alexandre
nanocopper obvius
Alexandre
what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
Rafiq
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
Damian
How we are making nano material?
LITNING Reply
what is a peer
LITNING Reply
What is meant by 'nano scale'?
LITNING Reply
What is STMs full form?
LITNING
scanning tunneling microscope
Sahil
how nano science is used for hydrophobicity
Santosh
Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq
Rafiq
what is differents between GO and RGO?
Mahi
what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq
Rafiq
if virus is killing to make ARTIFICIAL DNA OF GRAPHENE FOR KILLED THE VIRUS .THIS IS OUR ASSUMPTION
Anam
analytical skills graphene is prepared to kill any type viruses .
Anam
Any one who tell me about Preparation and application of Nanomaterial for drug Delivery
Hafiz
what is Nano technology ?
Bob Reply
write examples of Nano molecule?
Bob
The nanotechnology is as new science, to scale nanometric
brayan
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Damian
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
Renato
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
?
Kyle
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
Adin
why?
Adin
what school?
Kyle
biomolecules are e building blocks of every organics and inorganic materials.
Joe
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Source:  OpenStax, Economic development for the 21st century. OpenStax CNX. Jun 05, 2015 Download for free at http://legacy.cnx.org/content/col11747/1.12
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