0% Savings Rate - Way to Go!
Congratulations, American consumers, you have dipped to a savings rate of 0%! Of course, when you dig into the calculation of this savings rate, it is even worse than it sounds. I read that 401(k) withholdings are considered part of take home pay, so, if a consumer stashes away 10% in this 401(k) - obviously a good thing - but the calculations show this person has a 0% savings rate, then the person is actually spending 10% more than he takes in (via debt or liquidation of other assets). So, even though they are "saving," they are actually just treading water by assuming debt to fund their current lifestyle (while socking a little away for retirement - which will not mean anything if they have to service this debt when they retire).
Ah, the American consumer. They pulled us out of the depths of recession. Mr. Greenspan and his aggressive rate cutting made money so cheap and available, and the American consumer stepped right up to the plate and gorged himself on cheap credit.
Sometimes I think I sound like my grandparents, who lived through the depression. They were always so negative about people who "lived beyond their means" and debt was a terrible thing. Of course, I realize some debt (i.e., a mortgage) is necessary and can be structured in such a way to give you some benefits (i.e., tax savings). However, the current state of the typical American is frightening.
I wonder who these 0% savers are. I like to think that I surround myself with folks who are of a similar mindset as me. However, I am sure I have some 0% folks in my crowd.
Who knows what will happen when interest rates start to increase, housing prices stabilize or even drop, people must stop using the ATM that is also known as their house, and the economy dips into a recession. I think about the grasshopper and the ant story from my youth (I think it was an ant). As you may recall, the grasshopper played all day during the summer and the fall while the ant dutifully built housing and stored food in anticipation of the coming winter. Of course, the winter comes and the grasshopper finds himself in more than a bit of trouble. What I cannot remember is if the ant helped him - I fear the ants in the current situation will bear some of the brunt of helping all these grasshoppers one day.....
Ah, the American consumer. They pulled us out of the depths of recession. Mr. Greenspan and his aggressive rate cutting made money so cheap and available, and the American consumer stepped right up to the plate and gorged himself on cheap credit.
Sometimes I think I sound like my grandparents, who lived through the depression. They were always so negative about people who "lived beyond their means" and debt was a terrible thing. Of course, I realize some debt (i.e., a mortgage) is necessary and can be structured in such a way to give you some benefits (i.e., tax savings). However, the current state of the typical American is frightening.
I wonder who these 0% savers are. I like to think that I surround myself with folks who are of a similar mindset as me. However, I am sure I have some 0% folks in my crowd.
Who knows what will happen when interest rates start to increase, housing prices stabilize or even drop, people must stop using the ATM that is also known as their house, and the economy dips into a recession. I think about the grasshopper and the ant story from my youth (I think it was an ant). As you may recall, the grasshopper played all day during the summer and the fall while the ant dutifully built housing and stored food in anticipation of the coming winter. Of course, the winter comes and the grasshopper finds himself in more than a bit of trouble. What I cannot remember is if the ant helped him - I fear the ants in the current situation will bear some of the brunt of helping all these grasshoppers one day.....
posted by The Random Gay Guy at 9:21 AM
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