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OUTLOOK FOR SATOK»
Synopsis of talk by
Karl I . Bopp, Vice President
T
Federal Reserve Bank of Ph1ladelphla
before the
Fifth Annual Confèrence on Operatidns, Audit and Control
of the National Association of Mutual Savings Barths
Bellevue--Stratford Bolj&L, Philadelphia, Pa.
February lB , 1953

The buying waves touched off by the invasion of South Korea in
June 1950 and by the discovery of Chinese in the Northern Armies early in

1951 are

two dramatic illustrations of the slithery ground we are covering

when we try to appraise the topic that has been assigned to me:
look for Savings.

The Out­

These two spurts of spending show up clearly as sawteeth

in chfexts of the quarterly estimates of net personal saving published by
the Department of Commerce.
It is less well known that these aberrations seem to wash out
when we move from quarterly to yearly data.
sprees were followed by saving sprees.

In other words, the spending

In retrospect it appears that for

calendar years as a whole the amount that individuals saved in
again in

1951 was

1950 and

just about in line with the postwar pattern of savings

that has developed.

Of course, there are always some individuals who

save and others who spend beyond their incomes

I am speaking now of net

saving of our entire population.
With this qualification, let me indicate what I mean when I say
savings were about in line.

We seem in the last twenty-five years to have

developed four distinct patterns of saving.

In the period 1929 to 19^-1,

we did no net personal saving when our personal income after taxes was
less than, say," $50-$55 billion a year.

Below this level we ended up with

negative saving - a word that is as rough as the condition it is used to
describe.

Out of each dollar of income beyond this level, however, we

saved about



20^.

-

2

-

During the war period, as you all know, we saved much more than

20^

out of each additional dollar of Income.

(I must confess parenthet­

ically that I become disturbed when I remember what happened to the size
of the Government debt and to our money supply and then follow custom by
glibly talking about wartime savings.

But this is a complicated subject

that I shall not pursue here.)
After the w$r we developed a reconversion pattern of saving
during which we saved less and less despite rising personal incomes.
There is some evidence that we have been developing a new
pattern of saving since 19^7*

The chief difference between our new and

our prewar pattern is that we need a lot more income before we do any net
saving at all.

Instead of $50-$55 billion, we now need $1^0-$150 billion

of disposable personal income before we save anything net.
is primarily a result of the war-generated inflation.

This change

To me it was

equally interesting to find as I prepared this discussion that once we
reach this level of income - and last year we were
it - we are again saving something like

2C$

50 per

cent beyond

out of each additional

dollar.
At any rate that*s what we did in 1950 and in 1951* despite
the buying waves.

And, according to preliminary estimates, it was what

we did again last year, despite the absence of any sudden buying wave.
In trying to form some estimate of personal saving for this
year, therefore, I think we would do well to begin with some judgment as
to how much income we may expect to receive - after taxes.
running at a level perhaps

5 per

We are|now

cent above the average for last year.

Most economists that I have heard discuss the problem seem to guess that
ire are most likely to continue our "seething readjustment" at high levels
for most of the year.




If this judgment should prove fairly accurate, it

-

3

-

seems to me quite possible that personal savings in 1953 night exceed
those of last year by perhaps a billion dollars*

H y guess would be more
f

rather than less.
Now that X have given you a figure, I should warn you not to
take it too seriously.

Remember, it is based on an assumption as to the

general level of economic activity.

Remember, too, that we have had four

patterns of saving in the last quarter-century, and ppy develop yet
another.

Remember, finally, that la a country with a high standard of

living, there is a large margin between income and unavoidable expend!tureso

A large fraction of expenditures can be deferred or - by using

past savings or borrowing - can be accelerated.




Saving-Income Patterns

Unions $




Income

Composition of Personal Saving
(I billion)
1949

1947
Liquid Saving

1250

I95I

1952

11.9

6.7

4.1

3.1

6.5

11.6

13.5

3.4

3.7

3.8

3.7

3.9

4.2

4.5

Homes

-1.1

-0.2

1.5

1.8

2.9

2.8

3.0

Liquidation of
Cons. Debt

-3.3

-3.4

-2.5

-2.3

-3.2

-0.4

-2.5

Unincorporated
Business and
farms

0.8

-1.7

4.0

—0.6

-1.2

2.1

2.0

11.7

5.1

10.9

5.7

8.9

20.3

20.5

Discrepancy

0.3

-1.2

-0.4

1.0

2.3

-3.3

-1*5

Net Saving

12.0

3.9

10.5

6.7

11.2

17.0

19.0

Contractual

Total

Feb. 18, 1953




Composition of Liquid Saving
billion)
1Z7
9.

1Z8
9.

19A9

1950

1951

1952

Currency

0.1

—0.4

-0.5

—0.8

#

0.8

1.0

Demand Deposits

5.2

0.2

-2.2

-1.3

3.8

3.1

2.8

Time and Savings
Deposits
Commercial Banks
Mutual Savings
Banks
Savings and Loans
Postal Savings

3.5

1.2

0.3

0.2

0.1

1.6

2.7

1.5
1.2
0.4

0.9
1.2
0.1

0.6
1.2
-0.1

0.9
1.5
-0.1

0.7
1.5
—0*3

0.9
2.1
—0.2

1.7
2.1
-0.2

Securities

0.1

3.5

4.1

2.7

0.7

3.5

4.3

Total

12.0

6.7

3.4

3.1

6.5

11.8

14.4

Discrepancy

*0*1

--

0.7

—

--

-0.2

-0.9

Liquid Saving

11*9

6.7

4.1

3.1

6.5

11.6

13.5

3.4

3*7

3.B

3*7

3.9

4.2

4.5

Contractual
Insurance

*Less than $50 million.

Feb. 18, 1953