THE 1990S WERE a remarkable decade for saving and wealth accumulation.
After averaging 3.4 times GDP between 1950 and 1990, aggregate net
worth rose from 3.5 times GDP in 1990 to 4.2 times GDP in 2000, its highest
level since at least 1950. In nominal dollar terms, net worth rose from
$20 trillion in 1990 to $42 trillion in 2000. Much of the increase in wealth
was fueled by skyrocketing capital gains in the stock market, which helped
boost the aggregate market value of equities from $3 trillion in 1990 to
$15 trillion in 2000. The decade also saw widespread diffusion of stock
ownership (directly and indirectly through mutual funds) and substantial
increases in participation in and contributions to defined-contribution pension
plans, typically 401(k)s. At the same time, however, the measured saving rate, excluding capital gains, fell over the decade, continuing a
longer-term pattern.
