Pocket Sized Recession Predictor

A Personal Savings Rate falling below the Fed Funds rate has presaged every recession since the end of Bretton Woods. (1971)


You'll note there are two anomalies on this chart.

If you click on the link above, it will take you to the FRED website and become interactive. Mouse over April 1987, where there is a sharp drawdown, the ONLY time the relationship between Savings and Fed Funds inverted and DIDN'T trigger a recession. I can't prove anything (so far) but it looks to me like a lot of people wrote checks to cover Reagan's TEFRA 1986 "tax cuts."

The spike in December 2012 is a massive disgorgement of dividend payments to beat the 3.8% increase in the dividend tax, which affected those earning over 200K AGI filing single and 250K AGI filing jointly.

This chart has been added to the "ECONOMY AND LABOR" section of this website.

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Donald R. Davret, Investment Advisor Representative




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