1933 was the last time the U.S. savings rate was negative as it is now

[NNN0LHI]

http://www.suntimes.com/output/news/cst-fin-savings21a.html

Hey, big spender! Save yourself

The last time the U.S. savings rate was negative was 1933. The unemployment rate hit 25 percent, and more than 4,000 banks had closed.

It's hard to save money when you're selling apples on the corner.

In 2005 and so far in 2006, the savings rate is negative again -- we're spending more than we're saving. Unemployment is 4.7 percent, and the stock market is up almost 29 percent since the dark days of September 2001.

It looks like we're doing OK -- at least better than we were in the Great Depression.

So why can't Americans save?

[Roland99]

1. Actually, unemployment (and underemployment) is more like 12% now.

http://www.gillespieresearch.com/cgi-bin/bgn/article/id=341

[1932]

2. People didn't have credit cards in '33.

The stock market is up because companies are making money from people who are buying their products on credit. However, people are borrowing farther and farther into their own futures to underwrite corporate profitability today, and that behaviour is really testing our breaking limits as a society. How much of your future wealth can you give away to Visa and MasterCard before the whole system collapses?

If it weren't for credit cards, I suspect that the wage stagnation and polarization of wealth we've seen over the last thirty years would have us in a another Great Depression.

[CrispyQ]

10. I think you are spot on with the credit card observation.

My sister & her husband have seen a jump in their wages the past 3-4 years. Instead of enjoying a modest increase in standard of living & stashing some cash or making extra payments on their house, they are shopping like mad. All new furniture, appliances, an SUV, an RV, 3-4 vacations a year, & more! It makes my head spin every time I talk to her & hear about their new stuff or latest vacation. My mother told me they are paying on about 10 credit cards a month, ~gasp! & she (my mom) is starting to become concerned.

[1932]

12. I think what the IMF did to the developing world since 60s is what Visa

and MasterCard are doing to the American middle/working class today. You can saddle on a lot of debt on people and tell them to develop their way out of it. But nobody can develop their way out of anything when they're spending 20-50% of their annual earnings financing debt that didn't buy them the infrastructure they needed to become more profitable.

[CrispyQ]

14. Common Dreams recently had a great article

about how American's are trinket rich & assest poor. We have new cars, electronic trinkets, bright, shiny stuff, but we are poor when it comes to affording a home, a college education, & health care. I would say that many are also poor when it comes to leisure time.

The sad thing about my sister's situation is my brother-in-law absolutely hates his job. He started there as a worker & has advanced into management. He hates every minute he's there but he won't step down "cuz we need the money." They are on escalating binge of consumption & he's caught up in it too.

[Orrin_73]

3. I heard it from a friend who had lived in the US for a

few months. He told me the americans he knew earned about 2000$ a month but spend 2500$ a month. I found it quite strange. Unresponsible consumerism would be perfect word to describe this.

[1932]

5. A recent study showed that many Americans are not overspending on

unneccessary consumer goods, but are spending on health care and energy -- they got caught by price fluctuations for things that they can't really eliminate from their lives.

I do believe that many Americans spend a lot of money in ways that aren't essential (and often, it's on products that confer status -- and then increase other less discretionary costs, eg, SUVs and McMansions give you higher energy costs -- and this cylce, ironically, is driven by polarization of wealth (you don't want people to think you're at the poor end of the spectrum in a society with a spectrum so wide and extreme)). However, a lot of people are getting screwed in ways that are very hard for them control and are often just legislated profits for industries which have tight connections with our government (energy, health care...).

[Orrin_73]

8. I agree with you

Healthcare for a family of four in the US is 7000-9000 dollars. We have universal healthcare in Holland, we pay 100 euro's a month for healthcare. Children aged 18 or under pay nothing.

[acmejack]

4. Among certain groups unemployment probably is 25% right now.

Vietnam Veterans, Iraq Vets too. Inner city folk, a lot of folks are working under the table, there is absolutely NO WAY the government figures are any way close to true at least in Central Texas!

[dipsydoodle]

6. Inflation favours

net borrowers.:)

[dogday]

7. Haven't you heard? The economy is

doing great thanks to tax-cuts :sarcasm:

[JDPriestly]

9. People don't save because interest rates are so low on

savings. You earn more by borrowing at a low rate to buy something like real property that you think will hold or increase its value.

[1932]

11. That's partly true. People save less because they consider

their money in 401ks and real estate as their savings. However, Americans also have an average of 9,000 in credit card debt which they're paying off at interest rates higher than they're earning from their investment income, and real wages have stagnated over the last 30 years, and the government legislates the profitability of all those industries that suck the bload out of the middle class (like the Frist familie's hospitals and Enron), so that it's not just the case that people are making the calculated decision not to save.

People would save more if the government thought of its job as the protection of the well-being of people who work for a living, regardless of the interest rate on savings accounts.

Also, if people were shunning the safety of a savings account for a less liquid, riskier investment, like real estate, I'm not sure that's a reason to argue that savings rates don't matter. If the real estate bubble bursts, people are going to have immense capital gains losses to pile on top of their credit card interest, and that will be a big problem.

[Yupster]

15. When this story came out a few months ago,

some people pointed out that retirement plan savings like 401(k's) weren't included as savings in this study.

Does anyone know if that was true or not.

If it's true it makes the whole study a joke though as most people make their major savings through their 401 (k) or similar plans.

It's like saying inflation didn't go up last year if you don't count fuel and food prices. Now who would be stupid enough to pay any attention to a survey like that?

[pitohui]

16. it's buried in there but the article does say it flat out

it doesn't include your gains from real estate or stock -- most americans have their 401(K)s in stock and their biggest real estate investment is their own home

so it doesn't count the two largest forms of savings

it is a silly article and doesn't deserve further discussion

[Yupster]

17. Well what a stupid survey then

Why would any newspaper print anything so stupid.

News Item

Payton Manning accounted for less than 200 yards from scrimmage last season. *

* Figure does not include yardage gained through passing the ball.

[1932]

19. Over the long term, people's homes increasre at 1% per year.

I think it would be absurd to suddenly include that data in a savings statstic, especially at the peak of a real estate bubble.

Furthermore, the bottom 90% of income earners hold 10% of all stock. I'm not sure that including that number in an analysis of people's savings will tell you much (and see my previous post re 401ks).

The statistic in this article has historical significance thar I think is not mitigated at all by not including 401ks, real estate, or other shareholding info.

[leeroysphitz]

20. Lies, damnable, and statistics... nt

[1932]

18. Only 50% of Americans offered 401ks participate.

The average rate of return for bottom 20% is 4%, for top 20% it's 4-5 times that rate, and the average net value is 2-3 times your last year's salary. Some people don't get good tax advice and pay taxes on payouts.

I don't think it's a joke not to include 401ks in savings analysis since they're worth much less than the old defined benefits programs they've replaced, and I suspect those programs have never been inluded in the savings rate calculations.

[NNN0LHI]

13. People don't save because they are putting their money in the gas tank n/t