The nation s net household saving rate is the difference between the saving of the savers and the dissaving of the dissavers.

A variety of forces have contributed to a continuing decline in Japan s household saving rate.

CAMBRIDGE The household saving rate in the United States has tripled in the past three years.

That figure matches closely the fall in household saving and the resulting increase in consumer spending.

But, with the current low rate of household saving, the cycle of rising deficits and debt will soon make national saving negative.

In any year, some households are savers and others, especially retirees, are dissavers that use past saving to finance current consumption. The nation s net household saving rate is the difference between the saving of the savers and the dissaving of the dissavers.

The increase in the household saving rate reduces America s need for foreign funds to finance its business investment and residential construction.

Before it began rising last year, the US household saving rate had been declining for more than 20 years in response to the increasing level of household wealth.

Income growth and a lower household savings rate are essential to the shift in China s growth model, and each presupposes key reforms.

Household saving had risen from less than 2 of after tax incomes in 2007 to 6.3 in the spring of 2010.

Indeed, household saving rose from 2 of after tax incomes in 2007 to about 6 in recent months.

The recent rise in the US household saving rate reversed a long term decline that began 25 years ago.

CAMBRIDGE The saving rate of American households has risen sharply since the beginning of the year, reaching 6.9 of after tax personal income in May, the highest rate since 1992. In today s economy, that is equivalent to annual savings of 750 billion.

In fact, the household savings rate continues to rise.

CAMBRIDGE The saving rate of American households has risen sharply since the beginning of the year, reaching 6.9 of after tax personal income in May, the highest rate since 1992.

As a result, the country s household savings rate will decrease dramatically, making it increasingly difficult for the private sector to finance budget deficits.

CAMBRIDGE The household saving rate in the United States has tripled in the past three years. Why?

Another implication of this view is that the steep rise in savings in China is largely driven by a rise in the savings rate of middle aged Chinese (rather than a fall in the borrowing rate of the young).

Since after tax personal income accounts for about 75 of GDP, a household saving rate of 6 translates into just 4.5 of GDP.

The household saving rate therefore continued to fall until it was below 5 at the end of the 1990 s and reached just above 2 in 2009.

With a falling rate of household saving and the prospect of new fiscal deficits, the current account will soon be negative, forcing Japan to sell its debt to foreign buyers.

Indeed, with the average household savings rate having dropped recently to below 4 , too many families are in the process of exhausting their cushions of emergency cash, if they have not done so already.

The aggregate saving rate of the household sector reflects the difference between the saving of the savers and the dissaving of the dissavers.

Reducing the share of income that Chinese households save could also raise consumer spending faster and more easily. The high rate of household saving in China reflects many factors, including the risk of job loss and the lack of a reliable government pension program.

Another indication of the role of wealth in fueling higher consumer spending is the decline in the household saving rate. Total household saving as a percentage of disposable income fell from about 6 in 2011 and 2012 to just 3.8 in the most recent quarter.

Some of it will be saved. American household saving has shot up from 0 to 5 since the start of the recession, understandably to pay off debt.

A savings rate of 50 of GDP is too high under any circumstances, and household consumption equivalent to 35 of GDP is too low.

No leading country in world history has persistently maintained a negative saving rate.

While a 6.9 saving rate is not high in comparison to that of many other countries, it is a dramatic shift from the household saving rate of less than 1 that the United States experienced in 2005, 2006, and 2007.

Households will gradually save enough to restore their wealth, and household consumption will gradually recover as well.

Of course, some worried about the collapse of the household savings rate, but few were overly concerned.

Higher household saving depresses consumption because it is the difference between households after tax income and what they spend.

This time, the unemployment rate and household and government debt are much higher.

But as Louis Kuijs of the World Bank has pointed out, what sets China apart from many other developing countries is not that households save uniquely high levels of their income, but that enterprises do.

America s household savings rate was at levels not seen since the Great Depression, either negative or zero.

Conversely, the fall in savings in the US is largely due to higher borrowing by the young (rather than a fall in middle aged Americans savings rate).

So, despite the rise in the household saving rate, unless federal government policies change to shrink America s future budget deficits, the US will continue to be dependent on capital inflows from the rest of the world.

Household disposable income is about 60 of national income in China, and the household savings rate is close to 30 of disposable income.

Since 1955, Singapore has taken a direct approach a compulsory national saving plan, which generates very high saving rates.

The household saving rate therefore continued to fall until it was below 5 at the end of the 1990 s and reached just above 2 in 2009. At the same time, the fiscal deficit is more than 7 of GDP.

And lagging household income clearly contributes to China s trade surplus, because low domestic consumption tends to keep exports higher than imports.

Second, South Korean families feel compelled to spend a large share of their income (10 , on average) on education. With households already saving only around 4 of their disposable income, compared to 20 in 1988, there is little room for additional expenditure.

With a savings rate of barely 4 of GDP, the average US household is unlikely to be over saving.

Some of it will be saved. American household saving has shot up from 0 to 5 since the start of the recession, understandably to pay off debt.

As a result, the household savings rate has risen from zero to 4 of disposable income.