Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Savings rate lowest since the great depression (living on borrowed time?)
The Cincinnati Enquirer ^

Posted on 02/01/2006 6:04:26 AM PST by AZRepublican

The Commerce Department reported Monday that the nation's savings rate was a negative number last year.

You read it right. The average household didn't save a dime last year. In fact, the report said, Americans either took on more debt or dipped into previous savings in 2005 - to the tune of one half of one percent of their after-tax income.

The savings rate in the United States hasn't been this low since the Great Depression. But back in 1932 and 1933, unemployment was rampant, and many families had to break the piggy bank just to keep food on the table. This time, the analysts are saying, Americans seem to be spending money they don't have just to maintain a lifestyle to which they've become accustomed.

(Excerpt) Read more at news.cincypost.com ...


TOPICS: Business/Economy; Extended News; News/Current Events
KEYWORDS: consumersavings; depression; economicindicators; economy; savings
Navigation: use the links below to view more comments.
first previous 1-2021-4041-6061-73 next last
To: Lou L

National average. Two years ago. Would have to look up the source.


21 posted on 02/01/2006 6:27:03 AM PST by Juan Medén
[ Post Reply | Private Reply | To 19 | View Replies]

To: AZRepublican

I didn't see how they estimated savings in the article. Is it only the residual of earnings minus consumption?


22 posted on 02/01/2006 6:27:51 AM PST by paudio
[ Post Reply | Private Reply | To 1 | View Replies]

To: Juan Medén

Long term, yes.
Short term? After the ARM loans bust I wouldn't want to be a seller for a while.


23 posted on 02/01/2006 6:27:58 AM PST by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
[ Post Reply | Private Reply | To 20 | View Replies]

To: A. Pole
Hmm, and what if the prices of homes go down?

If those people hadn't been paying for their homes, they'd have been throwing their money at landlords.

Perhaps renting, rather than buying, is a good idea in some areas at some times. But usually it's not a good way to use money.

24 posted on 02/01/2006 6:28:42 AM PST by syriacus (Dems THINK that they have fire in their bellies. But it's merely indigestion.)
[ Post Reply | Private Reply | To 11 | View Replies]

To: Juan Medén
But real estate has proven over the years to be among the best investments a person can make.

In the coming era of Islamic nuclear terrorism, all of that is about to change.

25 posted on 02/01/2006 6:28:59 AM PST by Mr. Jeeves ("When the government is invasive, the people are wanting." -- Tao Te Ching)
[ Post Reply | Private Reply | To 20 | View Replies]

To: Lou L
I don't disagree that a home is a great investment,

Yes. Homeowners usually have some equity in their homes.

At least they haven't been turning their paychecks over to their landlords.

26 posted on 02/01/2006 6:31:08 AM PST by syriacus (Dems THINK that they have fire in their bellies. But it's merely indigestion.)
[ Post Reply | Private Reply | To 19 | View Replies]

To: Juan Medén
Moveover, are they taking into account pensions, 401k's, IRA's and stock portfolios? I think not.

You are correct. They are not taking into account these types of savings accounts. Consequently, their entire argument is bogus. My wife & I have $600,000 in a 401k. We do have an emergency "savings" account, but we pour all we can into the 401k. It's a great investment because of the tax savings, employer match, etc. Whoever keeps writing articles like this is living in the 50's.

27 posted on 02/01/2006 6:35:54 AM PST by ExtremeUnction
[ Post Reply | Private Reply | To 6 | View Replies]

To: syriacus
Gee. Would I rather have $5,000 in the bank and have owned a home for 10 years or a would I rather be a renter for 10 years with $5000 in the bank?
Owner with $5000?
Renter with $5000?
Owner with $5000?
Renter with $5000?

28 posted on 02/01/2006 6:37:34 AM PST by syriacus (Dems THINK that they have fire in their bellies. But it's merely indigestion.)
[ Post Reply | Private Reply | To 26 | View Replies]

To: AZRepublican
When the comet strikes Earth and 2/3 of the people are killed off, home owners will be sorry they sunk all that money in a drastically depreciated asset...

...just thought I'd add another worst case scenario....
29 posted on 02/01/2006 6:37:56 AM PST by Semi Civil Servant (The Main Stream Media: Al-Qaeda's most effective spy network.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: AZRepublican

"dipped into previous savings in 2005 - to the tune of one half of one percent of their after-tax income"
um aftertax income apparently does not include pretax items like 401Ks etc. so Americans could be saving more just not in completely liquid assets


30 posted on 02/01/2006 6:40:04 AM PST by DM1
[ Post Reply | Private Reply | To 1 | View Replies]

To: Lou L

i'm in a small town, in central MI, watching my house appreciate at 8% every 6 months.


31 posted on 02/01/2006 6:42:30 AM PST by absolootezer0 ("My God, why have you forsaken us.. no wait, its the liberals that have forsaken you... my bad")
[ Post Reply | Private Reply | To 19 | View Replies]

To: AZRepublican
Save more than one makes?

Incredible... a new "law" of thermodynamics has been discovered that will free one's soul.

32 posted on 02/01/2006 6:43:09 AM PST by Trajan88 (www.bullittclub.com)
[ Post Reply | Private Reply | To 1 | View Replies]

Comment #33 Removed by Moderator

To: Trajan88
Save more than one makes? Incredible... a new "law" of thermodynamics has been discovered

Yes

34 posted on 02/01/2006 7:07:58 AM PST by A. Pole (The freemarketeers are economic men, greedy, rational and controlled by the invisible hand market.)
[ Post Reply | Private Reply | To 32 | View Replies]

To: sgribbley

Did they feel that way about car loans back then? Did everyone buy cars without a loan? A lot of people wisely buy a car with home equity loan rather than a car loan since it is tax deductable.

Of course the best action is to only buy a car you can afford to pay cash for, but I would not count everyone who uses a car loan or home equity loan to buy a car to be a bad money manager, especially if they did it to avoid drawing down their large Roth IRA.


35 posted on 02/01/2006 7:11:40 AM PST by On the Road to Serfdom
[ Post Reply | Private Reply | To 33 | View Replies]

To: AZRepublican
Ok folks, one more time. This is how the government calculates the savings rate.

The rate of increase in consumer spending is subtracted from the increase in wages and the result is called the rate of savings. If spending climbs 1% while wages increase only .5% the resultant "savings rate is a negative .5% (.5%-1%=-.5%) It doesn't matter if in fact the money spent by the consumer was spent on a mutual fund, stock, gold or any other hard asset. The savings rate as figured by the government does not include home ownership, retirement accounts, collectibles or anything else of the kind.

It is the most useless and misleading of the statistics put out by the government.

36 posted on 02/01/2006 7:21:41 AM PST by Eagles Talon IV
[ Post Reply | Private Reply | To 1 | View Replies]

Comment #37 Removed by Moderator

To: ExtremeUnction

"Whoever keeps writing articles like this is living in the 50's."

Thank you, so true.


38 posted on 02/01/2006 7:43:14 AM PST by L98Fiero
[ Post Reply | Private Reply | To 27 | View Replies]

To: syriacus

We're on the same page -- there's a lot of equity built up in houses -- but my point is that there won't be any new equity being built up.

And as far as a source of funds to supplement "real" savings, I'd bet that the people who take out equity loans to finance their lifestyles are not only already maxed-out but will soon find out that that game is over, and the people who don't take out equity loans aren't going to start.


39 posted on 02/01/2006 7:58:15 AM PST by jiggyboy (Ten percent of poll respondents are either lying or insane)
[ Post Reply | Private Reply | To 15 | View Replies]

To: Lou L

Keep in mind that if you put down 20% on your house, you can consider that your "investment", and housing prices going up X% means that your investment is actually up 5X%. You can adjust that for rental price vs. owning price, which used to be pretty comparable, cost of an equity loan, etc.

But yeah 17% rises on the house price itself is done for a long time. (I myself anticipate that April 2006 will show the first year-over-year declines in the National Median Existing Home Price published by the NAR -- which will wreck their chant that national housing prices have never gone down on a yearly basis. National Median New Home Prices were YOY negative this past month BTW.)


40 posted on 02/01/2006 8:04:54 AM PST by jiggyboy (Ten percent of poll respondents are either lying or insane)
[ Post Reply | Private Reply | To 19 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-2021-4041-6061-73 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson