Savings Rate at Lowest Level Since 1933

[spinbaby]

WASHINGTON - Consumer spending rose at a rapid pace in December, far outpacing income growth, a development that helped to push the savings' rate for the year down to the lowest level since the Great Depression.

The Commerce Department said Monday that consumer spending rose by 0.9 percent in December, more than double the 0.4 percent rise in incomes.

To finance the increased spending, Americans dipped further into their savings, pushing the savings rate for all of 2005 into negative territory at minus 0.5 percent. That was the lowest annual savings rate since a decline of 1.5 percent in 1933, a year in which the country was struggling to cope with the Great Depression.

http://news.yahoo.com/s/ap/20060130/ap_on_bi_go_ec_fi/economy

[Debau2005]

1. Savings Rate?

What is that?? Oh, wait, is that where I should have enough money after putting gas in the car, heating my apartment, and feeding myself that I put money into an account and "save" it? :rofl: That's funny. I think my savings account nest egg is currently $45.00!

[Laughing Mirror]

2. 45 dollars? You are rich, you are in positive territory, you are saving

You are bucking the trend!

[bee]

6. lol. you took the words right out of my mouth,

$53.00 here. Yeah baby! :woohoo:

[Debau2005]

25. Hey now

According to lagavulin we are being to cavalier. Straighten up or it might cost you $53.00! ;-)

[lagavulin]

10. And you have how much debt...?

I don't think it's cute to be so cavalier about having no savings. Granted times are definitely hard and only going to get harder, but if you've racked up significant debts then you've basically bought your own ticket onto the Titanic.

And the reason you're so unprepared for the coming depression is because you've agreed to give your monthly tithing to support the very system you rail against...and to make that wealthy 1% even richer.

No offense. Just saying...

Bon Voyage!

[Debau2005]

23. Why yes I do have debt.

I am currently knocking down my debt in good speed. But according to you I should rail against the system, by not putting gas in my car to go to work, buying groceries, or heating my home?

Perhaps a sense of humor would help! If I lost my sense of humor I would just be broke and unhappy, at least I have the ability to laugh at my situation!

[OneBlueSky]

3. most middle class Americans consider equity in their homes . . .

as their savings . . . they're in for quite a shock when the bubble bursts . . . those who have tapped into that equity up to near the inflated value of their properties will be the ones who will hurt the most . . .

[DBoon]

39. even if the bubble doesn't burst

you'd have to sell your home (meaning your residence) to get at it.

Home equity ain't liquid.

[lovuian]

4. Depressions occur when over 80% of the wealth of the

country is own by 1% ...... this is known by the economists and yet it is occuring... Man doesn't learn...

[Jackpine Radical]

5. They know. They don't care--or rather, they welcome the depression.

I think it was Andrew Mellon, in about 1931, who said "depressions are the times when wealth flows back to its natural owners." IIRC Mellon was Hoover's Sec'y of the Treasury.

[Laughing Mirror]

12. They do

It provides them more opportunity to show how charitable they are. They have charity balls. Deck their trophies wives out in fabulous ball gowns. They live it up, have a high old time. The more desperate and impoverished the unwashed masses become, the headier, the more intoxicating it is, and the precious few at the Mr and Mrs Andrew Mellon charity ball just gets higher and higher and higher.

[RUMMYisFROSTED]

31. You captured it perfectly.

[ProfessorGAC]

9. Isn't This An Obvious Indicator Of Economic Ill-Health?

Papers look at GDP growth, consumer spending, inflation/CPI, but when it comes to a clear indicator that the growth is unsustainable since everyone is spending every dime they get, we don't get news reports about the weak economy.

The market hits 11,000 and headlines wrongly declare this a sign of economic strength, but increasing debt, reduced savings, and high inflation are not an indicator of economic weakness?

The market falls back below 11,000 but it doesn't mean the economy is weak?

This is preposterous and the media has wholly dropped the ball on this.
The Professor

[barb162]

7. The media won't pick it up because most of the reporters

don't know what the hell they are talking about when it comes to economic issues. The NYSE becomes the measure of all things. Forget all about levels on debt, foreclosures, rising personal bankruptcy, trade deficit, etc

[ProfessorGAC]

8. I Guess That Was My Point

The news media doesn't have anybody who actually understands economics. (No, Larry Kudlow definitely does not count.) So, they kneejerk over every positive event but fail to recognize every equal reaction. As a result, if it is a slow news day, NYSE gains get headlines, but a busy news day results in a 400 point plunge being on Page 4.
The Professor

[barb162]

13. I know. I was just reinforcing your point for people who come on

this thread. It's a horrible problem and people think the economy is okay because the NYSE went up (Question. what did the market do today? Answer. It went up honey. Translation: Oh everything's fine). I think the dollar will collapse by the end of this year.

[Mithras61]

34. I would have to agree...

especially if Iran is successful in getting its oil bourse up & running (they will be trading in Euros). I fear that the oil bourse will be the real reason behind the invasion of Iran though (as I suspect it was at least partially behind the invasion of Iraq - they had just recently started trading oil in Euros when we began the bombing). Quite honestly, I don't see how we can continue in this vein... our foreign debt dwarfs our domestic debt, and the trade imbalance seems to be designed to make it worse (China hold the lion's share, but several other oil dependant nations hold huge ammounts as well). If we "allow" trading in Euros, then the oil-dollar will tend to be depressed (especially considering the inflationary policies of the current administration). The only thing left would be devaluation, which could be disastrous for us (even with savings, as they would also be devalued).

I suspect that deep down, many people know this and see living hand-to-mouth as their hedge against devaluation & inflation.

[Marie26]

36. Stock profits & massive layoffs

NBC News reported it tonight. What I don't understand is how both savings and spending can be down at the same time. This article seems to be spinning the results as, "oh, Americans feel so confident that they're overspending" but that's contradicted by the numbers showing big drops in sales of cars, etc. And that isn't what I've seen. People aren't spending wildly out of overconfidence. What's really happening is that people now have to spend all their money, plus more, to maintain the lifestyle they had before. And the worst part is that that "negative spending" is probably credit cards. The GOP has just passed legislation making it impossible to declare bankruptcy & also raised CC payments at the same time. Most Americans are running on empty, and losing any financial security. It's getting hard to ignore the combination of "Record Exxon profits" & mass layoffs. There's 2 economies now; for the corporations and everybody else.

[AnneD]

18. The other thing to consider about Business Media....

it has been bought and paid for just like the MSM. So much of it has an agenda driven spin, if you know what to look for.
And you are so right about covering 1/2 of the equation. When a company is in trouble, they automatically lay off rank and file workers, the stock goes up, the CEO's get a hefty bonus, and everyone is happy (except the workers-but they don't count). The average CEO does not use their brain cells to make a more innovative product, stream line, etc.
Next time a business in in trouble, how about tyeing CEO bonus to results. If the company is losing money, how about shedding a few layers of management first before firring the producers or cut some of the CEO pay and perks that now eat up 10% of company money.

[kenny blankenship]

41. Our economy will be getting "better and better", to hear the media tell it

--always improving, steadily going from one state of robust convalescence to even more rosy heights of health, until it finally turns purple and belches up the grave gas building up inside it.

[spinbaby]

11. An interesting revision of the same story

Consumer spending surprisingly strong


WASHINGTON (Reuters) - U.S. consumer spending shot up a surprisingly strong 0.9 percent in December as shoppers, enjoying a respite from inflation, dipped into savings or tapped assets to make purchases, a government report showed on Monday.

http://news.yahoo.com/s/nm/20060130/bs_nm/economy_income_dc

[AnneD]

21. In Dec...

we had 3 paychecks (if you are paid Q 2 wks). Gas was down and the increased minimum payment on CC was not in place so I can see why there would be a slight increase. Remember, it wasn't the spending increase that Wall St expected.

[RUMMYisFROSTED]

32. IOW:

Xmas.

[davekriss]

14. Sky high interest rates here we come!

And if not, devalued dollar -- and even more wars to ward of pricing of oil in Euros.

[FormerRepublican]

15. I guess this blows Bush's health savings plans out of the water...

If people don't have any money to save, what good are they?

[Endangered Specie]

16. Well shoot, if the guvment can have a multitrillion dollar defecit...

why can't I! :sarcasm:

[melm00se]

17. interesting graph

any ideas as to why as one goes down the other goes up:

[AnneD]

19. The wealth is an average......

for example, 5 homeless men are sitting at a table-what is their average wealth and how much so they have in savings. They are joined by Bill Gates-now what is their average wealth and how much is in their savings accout. I think it show wealth concentrating....but then I'm not a surprised economist either.

[Mithras61]

35. Which is why the more reliable reports cite...

median income instead of "average" (which is really the mathematical mean).

[mainegreen]

27. A lot of people aren't satified with the PB&J lunch

and a teeny-tiny used car lifestyle. My wife and I are lucky, we make Ok money, but we have 1 crappy car, don't eat out, make lunch, buy in bulk and generally go cheap. As a result we save about 14%.

It's bloody hard though. Especially when everyone you know is living it up!

[On the Road]

29. Good for You, Man!

You are the exception. There is a tremendous pressure to consumer.

The savings rate for Chinese people in the US is 23%, and many of those people have below-average incomes. It can be done, but you have to go against the flow.

[hvn_nbr_2]

30. What do the terms mean?

What do they mean by "household financial wealth" and "DPI"?

"Household financial wealth" sounds to me like an economist's term for something very specific, which doesn't correspond to what most of us think when we hear the term.

DPI--"disposable personal income" perhaps? If so, how exactly do they define "disposable"?

[DBoon]

40. I bet that personal wealth includes home equity

which means it is a mirage

[TheFarseer]

20. What the hell incentive is there to save?

If you're in the stock market, then Ken Lay and friends could run off with your money. The stock market makes no sense to most people and they will just wind up losing their money. If you put it in a savings account, you get less than 1% interest, plus it could bump you up to paying 10 more dollars on the tax table, plus if you get your taxes done at a professional place, you have to buy another form. So theoretically, $12 in interest from a savings account could bump you up from paying $1020 in taxes to $1030 in taxes and cost you $5 for a schedule B at H&R Block and end up costing you $15 to make $12 in interest off a savings account. Why not make the first $100 of a savings account tax free and help out small savers? Then do the same for dividends to help small investors and take away the absurd 5%-15% rule for dividends and capital gains which mostly helps millionaires.

[raysr]

22. That's what makes

"Health Savings Accounts" so sensible.

[Deja Q]

24. Today consumer spending was shown to be very high... tomorrow,

they'll say what they said 2 days ago: Consumer spending hit a new low.

Can't the media make up its mind? :D I mean, the A.P. and Reuters are the only two central sources I know of and that's where everybody gets everything...

[catmandu57]

26. I'd really love to sock a few dollars away

each month, but we can't. I know we could and should, it just seems that when we do there's always something that eats it up. The car needs something, the house needs something on and on it goes.

[0007]

28. You and every American that wasn't born with a silver spoon

in you're chops and to nervous to steal.

[Bigmack]

33. How about China?

Savings rate of around 40% of GDP

"The high savings rate in China is linked to a countrywide culture which discourages over-spending, places a high importance on the structure of the society and family values, as well as may other factors, Zhou told a session of the World Economic Forum.

"Talking about the export sector and overseas investment, it's related to the savings rate. In China, the savings rate is a little bit over 40 percent of the GDP," Zhou said.

"China is undertaking several reforms related to the safety net: pension system reform, medicare reform and education(reform). This is a transitional period and the population does not feel good enough in terms of certainty to spend money. So temporarily there is an intention for people to save higher than they should."

http://english.sina.com/business/1/2006/0126/63597.html

[Art_from_Ark]

44. I think savings rates are often high in newly-industrializing

countries. Things are just getting started, there is intense demand for capital, consumer credit systems are not well developed, and interest on savings is relatively high. So there is incentive for workers who are eyeing a big-ticket item but who don't have the ready cash, to save, make quite a bit of interest in the process, and buy their item when they feel they have a comfortable enough margin.

The same can hold true for people in countries where money has been scarce in the recent past and there is not a recent history of runaway inflation.

[Thor_MN]

37. Three years with negative savings rates 2005 and two year depression years

and NO ONE seesm to be talking about it. What happens when people have to pull the plug on whatever savings they do hold (their house or retirement plan) to pay off their debts? There are people alive who lived through the Great Depression, I'm hoping their lives aren't going to be bookended...

[kiraboo]

38. Remember the shrub's invocation "Spend, spend, spend!" as

a means of keeping our economy robust? I have family who took that advice to heart and would earnestly advise me to do the same, for the good of the country. It was positively embarrassing to hear, and I wondered back then whether those who demonstrated their patriotism by shopping 'til they dropped would ever recognize their folly. Still wondering.

[LiberalCompassionate]

42. a minus 0.5 percent savings rate

This supports Chimperor's SOTU speech tomorrow when he starts sputtering about "medical savings accounts" for the little people

:sarcasm:

[JusticeForAll]

43. If I make additional payments to my mortgage

am I considered saving?

I'm a saver but I'm just wondering how much of a saver I might be. THanks to anyone who can answer this for me.

[pro_blue_guy]

45. I'm ahead of the game :)

Well it's a good thing I'm a cheap-ass Italian. I don't spend my money on anything; maybe a little food here or there LOL

[InsultComicDog]

47. Technically no

But I think getting out of debt is a worthwhile goal.

[young_at_heart]

46. This important piece of information should be on ALL the news programs

It should also be on the front pages of all the newspapers.