Wednesday

 Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 9 The Real Economy in the Long Run
Chapter 26 of 36 Saving, Investment, and the Financial System
Section 11 of 25
…
The institutions of the financial system including bond market, stock market, banks, and mutual funds, coordinate the economy's saving and investment.
Saving and investment are main determinants of GDP and living standards growth.
Macroeconomists must understand how financial markets work and how various policies and events affect them.
To start an analysis of financial markets we discuss the key macroeconomic variables that measure activity in financial markets.
Our emphasis here is on accounting data, not on behavior that creates the data.
…
Accounting refers to how various numbers are defined and summed up.
A personal accountant helps an individual add up their income and expenses.
A national income accountant, a macroeconomist, does the same for the economy as a whole.
National income accounting rules include several important identities.
An identity
· is an equation that must be true because of how the equation variables are defined
· clarifies how different variables are related to one another
Next, we will review some accounting identities that show the macroeconomic role of financial markets.
… …
emphasis is on accounting, not behavior
aikei ni jūtenwooku, koudou nai
会計に重点を置く, 行動ない
… …
“Saving and investment are main determinants of GDP and living standards growth.” – What is the largest source of savings in the U.S. economy? Grok:
The largest source of savings in the U.S. economy is domestic business, primarily corporate saving, mainly through undistributed profits/retained earnings.
Business saving dominates because corporations retain a large share of profits rather than distributing them all as dividends, providing internal funds for investment.
This aligns with the statement on saving and investment driving GDP and living standards growth, as business saving directly supports capital formation and productivity gains more than household saving in aggregate.
Household personal saving rates remain low (around 3–4% recently), reinforcing businesses as the primary engine.
Government saving is typically negative due to budget deficits, so it subtracts from the total savings.
… …
"Household personal saving rates remain low around 3–4% recently, reinforcing businesses as the primary engine." - this includes billionaires? Grok:
Yes, the household/personal saving rate fully includes billionaires, high-net-worth individuals, and the entire top 1%, along with every other household.
… …
What percent of billionaire’ income becomes savings? Grok:
Billionaires and the ultra-wealthy typically save or invest 40~50%+ of their income, far exceeding the aggregate household rate of about 3~4%.
The other 50~60% of billionaires’ and ultra-wealthy individuals’ income is primarily allocated to taxes, philanthropy/charitable giving, and personal consumption/lifestyle outlays — though true consumption represents a surprisingly small share, an estimated 1%~25% with the richest spending the smallest percentage.

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