Replies

-the article was about the current account deficit the port deal and the consequences for the US and it is or was a good one.

- My point is the question about future grwoth and consumption in the US because you can not only look at one site of the picture. Your argument of net wealth of american households is correct and a good one but also very tricky.
If you look at the numbers you will see that real estate showed the highest increasings with more than 50% within less than four years. The fast grwoing mortgages compared to other times in history indicates the same. Households in the US behaved as they did in the last years not because of their stocks. The increases of the value outperforms the increases of the mortgages. So everything is fine. by the way nearly 70% of the growing net value could be explained with growing real estate prices. To say that would not be fair because soemone must also take the growing liabilities into account.

In the last year the saving rate was negative that means americans already spent more than they earn (in general).
You say (or better i do not know if you say that) this can go on because the net wealth of american household is increasing but not their net wealth will pay for consumption or mortgages it is their income and here we are already negative (saving rate).
So in my opinion it does not need a housing bubble or fast growing rates to bring a lot of americans to a point where they simply can no longer increase their consumption at the same level as we saw it during the last years because that would mean additional growth .
I do not believe in a recession or something like that just slower growth.
Your net wealth will only play a part in this gáme when the debt burden is at a point where the income can no longer pay the mortgages and when a household has to sell their assets hopefully to this higher prices.

If this continue the future would have to be this
- always increasing asset prices
- so that amercians can effort to spent the way they do and have a negative saving rate. But this negative effect will be outperformed by the increasing of their wealth so they can spent more and more. So at some point in the future when their "normal" income can no longer pay for their consumption and growing mortgages it will be payed by their assets that they can always sell at these always increasing prices.

Thanks for going back the article. Steve Roach is a big-tax-Democrat. He hates Bush, he lies about him, and he wants Democrats in power to raise my taxes. Three of his lies are that Bush caused a recession, the recovery was jobless and now the jobs are payless. Roach says the (1) US economy is collapsing, (2) we need Democrats, and (3) higher taxes. From the article:

.
1.	America no longer has the internal wherewithal to fund the rapid growth of its economy.
2.	who is really to blame in all this? ... the US body politic.
3.	targeted protectionism can, indeed, redirect the sources of external commerce.

You say "not their net wealth will pay for consumption or mortgages it is their income". This is a mistake. The increase in total assets is $14 trillion and the increase in mortgages is $3 trillion. Americans are making more money than they spend and they are getting rich.

When Roach says savings is down, he uses numbers from the BEA that are used to calculate the gdp. They say savings is the difference between income and consumption. Net worth numbers come from the Federal Reserve Board. They use the number for deciding interest rates. The savings that the BEA is talking about is different from what Americans do when they want to set money aside and keep it for the future. That's why the BEA savings can be negative, and Americans can be left with more money in their savings accounts at the bank (look at the numbers: they went from $3,267 billion to $4,681 billion in four years and savings bonds in their portfolios ($190 bil. to $204 bil.). The problem is that savings is not the same as savings.

You also said "70% of the growing net value could be explained with growing real estate prices." In the past four years it was only half.

2001

2005

change

real estate	$13,710	$20,778	$7,069
total assets	$48,590	$62,485	$13,896
			51%

This is not my idea, this is what the Fed says. I use the numbers that tell me what is happening with money so I can feed my family. I say Americans are increasing their wealth, this has been going on for a long long time. Roach uses only the numbers that can get people to vote for a Democrat. Nobody has shown that savings, the current account balance, or China can change the fact that we are getting richer, and I will not vote for Mrs. Clinton and her high taxes.