No. of Recommendations: 5
Part of the Kalecki-Levy Corporate Profit Decomposition is personal Savings. As I wondered what is included in personal savings I was surprised that both realized and unrealized capital gains are excluded from personal savings. So, if you buy a stock for $100 and sell for $200 and pay $15 capital gains, your personal savings actually decreases by $15 rather than increasing by $85.
So as a retiree, even if your net worth is increasing due to capital appreciation exceeding spending and taxes, your spending and tax payments are lowering the nations personal savings rate. Makes me wonder about financial posts discussing the changes in personal savings rate.
Aussi
From the St Louis Fed
https://www.bea.gov/resources/methodologies/nipa-h...Income and saving
Some economic theorists have broadly defined income as the maximum amount
that a household, or other economic unit, can consume without reducing its net worth;
saving is then defined as the actual change in net worth.18 In the NIPAs, the definition of
income is narrower, reflecting the goal of measuring current production. That is, the
NIPA aggregate measures of current income—gross domestic income (GDI) for
example—are viewed as arising from current production, and thus they are theoretically
equal to their production counterparts (GDI equals GDP). NIPA saving is measured as
the portion of current income that is set aside rather than spent on consumption or related
purposes.
Consequently, the NIPA measures of income and saving exclude the following
items that affect net worth but are not directly associated with current production:
• Capital gains or losses, or holding gains (or losses), which reflect changes in the
prices of existing assets and thus do not represent changes in the real stock of
produced assets;
• Capital transfers, which reflect changes in the ownership of existing assets; and
• Events, such as natural disasters, that result in changes in the real stock of existing
assets but do not reflect an economic transaction.
Thus, for example, the NIPA estimate of personal income includes ordinary dividends
paid to stockholders, but it excludes the capital gains that accrue to those stockholders as
a result of rising stock prices. Personal saving is equal to personal income less personal
outlays and personal taxes; it may generally be viewed as the portion of personal income
that is used either to provide funds to capital markets or to invest in real assets such as
residences.19
