Some stark news leading into the State of the Union this evening. This is the reality to some of the fiction we will hear from the president tonight. http://www.indystar.com/apps/pbcs.dll/article?AID=/20060131/BUSINESS/601310394/1003/BUSINESS U.S. savings rate is lowest since Depression WASHINGTON -- Americans are spending everything they're making and more, pushing the national savings rate to the lowest point since the Great Depression. Soaring home prices apparently have convinced people they don't have to worry about saving, a belief that could be seriously tested as 78 million baby boomers begin to retire. The Commerce Department reported Monday that Americans' personal savings fell into negative territory at minus 0.5 percent last year. That means that people not only spent all of their after-tax income last year but had to dip into previous savings or increase their borrowing. The savings rate has been negative for an entire year only twice before -- in 1932 and 1933 -- two years when Americans were having to deplete savings to cope with the massive job layoffs and business failures caused by the Great Depression. This time the reasons for the negative savings rate are vastly different. Americans are spending all their incomes and then some because they feel wealthier due to the soaring value of their homes, which is the largest investment many own. But analysts cautioned that this behavior is risky at a time when 78 million Americans are on the verge of retirement. The baby boomers start turning 60 this year, which means they can begin retiring with Social Security in just two years. The savings rate stood at 10.8 percent of after-tax incomes in 1984 and has been declining steadily since that time. It was down to 1.8 percent in 2004. "Americans seem to have the feeling that it is wimpish to save," said David Wyss, chief economist at Standard & Poor's in New York. "The idea is to put away money for old age, and we are just not doing that." Analysts said that a rebound in stock prices after the 2000 market collapse also has many Americans feeling more wealthy. "Americans have been content to spend a lot more than is good for them or for the economy," said Lyle Gramley, senior economic adviser at Schwab Washington Research Group.
Underoverup - please share with us your opinion of how savings rate impacts the economy. I'm curious to see your opinion on savings' pluses and minuses.
Less savings equals less money available in the banking system for investment, more reliance on Social Security, and highlights the fact that real wages for most of the poulation is declining. These declining wages are a part of what leads to the reduced savings. The impact may be deferred, but it is like premature ejaculation...coming quickly.
This is the fact of the matter: My opinion on the matter will not change this fact. Why is a negative savings rate [the first since the great depression] a good thing bigtexxx?
Low savings rates in a low-interest rate environment? NOOOOO. Who would have thunk it? LMAO at the clueless libs' desperate attempts at making an economic point.
I'm not going to pretend that I know much about economics, but this thread prompted me to do some research. Isn't the low interest rates and negative or low savings a bad thing? http://www.economist.com/opinion/displaystory.cfm?story_id=5385434
This is a funny statement. I'm sure you know that interest rates were lower than today's level for 3 decades 30's-60's, yet the savings rates were musch higher than today. For Bigtess, savings rates are important because household savings and foreign investments must cover all of the federal government's deficits (which are substantial, thanks GWB) as well as any financing for the corporate sector. Would you rather have even a larger percent of our debt owned by foreigners?
Can any other liberals offer some more possible explanations? I'm not satisfied with what's been presented so far. Not at all.
Glad to know I'm in the minority. I save like a muthaf**a (and, no, not in a savings bank account). The good news: I will almost definitely have millions at the time I retire. The bad news: I don't get to touch any of it until I'm really friggin' old. Until then, I tighten the belt, bite the bullet and drive a POS car. More bad news: millions of dollars 30 years from now aren't worth as much as millions of dollars today.
Eh, savings are overrated. I mean....who needs savings when you will never be able to afford to retire anyway!
Why aren't you satisfied? Could you tell us how you view our current low interest and negative savings rates situation? I'm not trying to troll, just trying to learn something here. Most of what I read when I google state it isn't ideal.
This is the fact. Please explain how the negative savings rate [first since the depression] is good for the economy. Thanks.
It's like that other Bushism, the "up is down" theory. The deficit is actually a good thing for the economy.
did you actually read the above article? Are you trying to say that things are similar to the depression now? The negative savings rate is due to people buying things they can't afford because they feel they'll be able to save later on. This has much less to do with the economy than it has to do with people's ignorance about how to save money. Regardless, this article is about people's recent spending habits. From a purely economic standpoint, this is good for the economy because people are using their money to buy goods.
Thanks for the synopsis, but I still can't imagine how this much dept in the US from the bottom all the way to the top can be considered a postive.
Short-term, it helps keep the expansion going. Long-term? The next time there is a recession, it will be that much worse because people won't have as much in savings to adjust to it. Spending from savings during economic expansion is a terrible idea for the long-term health of any economy. The whole point of savings is to save for the bad times.
Gotta love Major discussing the savings rate. I would call him an expert on it!!! Just check out the two words underneath his name!!! Same goes for underoverup. LOL
I agree, it has to do with people's spending habits. However, is this good for the economy? From the article I posted:
And when the economy turns, people will have to adjust their spending habits appropriately. Supply will outweigh demand, and prices will go down. If the Fed needs more money in savings, they will raise the interest rates to spur people to see the value in putting their money away. Supply prices going down and interest rates going up. We will have some level of inflation in the next ten years, but that has been a foregone conclusion for a while now.
