Posted on 01/10/2006 7:33:53 AM PST by SirLinksalot
Americans saving less than nothing Spending could outstrip income in 2005, which hasn't happened since the Depression
Tom Abate, Chronicle Staff Writer
When the Commerce Department recently tallied up consumer finances for November, it found that Americans shelled out more money than they took in. It was the seventh such month of red ink during 2005.
Kevin Lansing, an economist with the Federal Reserve Bank in San Francisco, tracks the personal savings rate -- the Commerce Department's measure of how much consumers have left after spending is subtracted from income. In November the savings rate was a negative 0.2 percent.
Given how much red ink households racked up in the first 11 months of last year, Lansing said the nation's personal savings rate could well be negative for all of 2005.
That, he added, would be "the first such occurrence since the Great Depression."
The term "savings rate" may be a misnomer. Keith Leggett, senior economist with the American Bankers Association, described the measure as a tally of all the income that isn't spent.
"Savings is the absence of consumption,'' he said.
Traditionally this unspent income has been used to accumulate capital for future investment. By contrast, the recent spell of low savings -- or high spending -- has provided a short-term stimulus, helping the nation's output of goods and services grow at an enviable 4.3 percent rate in the third quarter of 2005.
But many experts say that in the months ahead, savings-starved, debt-burdened households will slow their spending and, with it, the economy. "You're seeing a situation where the consumers are spending every penny they possibly can and borrowing on top of that,'' said Joel Naroff, a Pennsylvania economic consultant, who expects growth to cool in the near future.
(Excerpt) Read more at sfgate.com ...
I would expect that, as the nation gets older, there would have a negative rate, as older folks start spending their retirement funds.
I also am curious if this accounts for investment in real estate, business, and stocks.
It seems like experts have been predicting an economic catastrophe based on overspending for a number of years, now. Admittedly, my attention fades in and out ... but if there's been a nationwide cash-flow crisis during this decade, I must have missed it.
This article doesnt prove anything.. Someone who has been investing for a decade or so wants to spend the money they made, doesnt prove americans arent saving.. I'm still saving 25% of my pay a year... more liberal nonsense from san fran.
Sounds like more liberal wishful thinking.
I plan to retire in 2 years, at 62, and I'm determined to go into it without carrying any debt.
Now, in my 50s with my kids out of college, I am saving 25% of my income. However, in days past, it was hard to save. I think the key is to keep you standard of living below the cost of living so you have a net cash flow.
But if you and I are saving, there must be some really big spenders out there if the net is negative.
Of course, these guys will be working for us for the next 40 years. Their interest payments are our income.
My sentiments exactly. They just can't stop trying to pound the economy into a recession to promote their '08 agenda.
They've also been conditioned that there won't be Social Security when they get there, and maybe a really high percentage couldn't save enough for their retirement if they wanted to so why bother. Heck, if it's harder to declare bankruptcy, consumers are just going to have to accrue more debt.
When I was really young (1950s) the goal was to get a 20-year mortgage, raise the family in that house, and pay it off. Now, the common practice is to use any equity as a piggy bank.
I don't know where it goes, except the rich will keep getting richer. That's the one given.
I don't think 401k money is included as savings...so if you add in 401k money...its a whole lot of "savings".
Please NOTE: These figures do NOT include "savings" in IRAs, 401k's and pensions...
Yeah - I put quite a lot into 401k, and we're pretty much hand-to-mouth after that.
"I don't think 401k money is included as savings...so if you add in 401k money...its a whole lot of "savings"."
If so, this "savings" number is completley meaningless.
Most people I know put the max allowed by law in their 401K.
Wait until the grandchildren come along = empty pockets again!!!!!!!
Same situation here. In FL, people are hit by massive property insurance premiums. Add to that, at least where I work, raises for the past 4 years have been 0.5 to 1.3 percentage points below inflation. Net result same bills, but less income. The economy and my 401K are doing well, but my daily living standard is going down without the use of credit cards or home equity.
I get the impression from these kids that they've never had to wait for anything they wanted - ever.
I could be wrong, but I believe the 'savings rate' only includes what people people put into their bank accounts and CDs.. making it a pretty worthless figure.
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