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:
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| 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.
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change |
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| real estate |
$13,710 |
$20,778 |
$7,069 |
| total assets |
$48,590 |
$62,485 |
$13,896 |
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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.
1. I don´t believe that politics has such an huge influence and can be blamed for such development. The people have to decide on their own how to spent their money and what is reasonable not some politicians.
2. The american economy showed and shows solid growth and is healthy. The current account deficit or trade deficit is no problem because there is no sign that foreigners (asians) stop funding that.
3. I am interested in that because of my profession but also because i find it a very interesting situation in the US and a very unique one.
"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."
I make research to develop credit rating systems not especially for private households so i have a different view on this but these numbers ( saving rate or net wealth) are far to general to talk about individual situation and that´s what it is in the end.
There is a difference between income and wealth from asset values and Americans are not making more money than they spend but they are clearly richer according to the numbers we discussed.
So one can say the gains of my assets represents income for me and i can spend it because i am richer now than i was one year ago. But these gains only equals income when they are realized that´s the reason why no company on that planet is allowed to publish unrealized gains and companies sometimes have these huge hidden reserves especially here in germany (but this is changing).
If this person does not want to sell the asset but wants consumption now (negative saving rate) he has to get a loan or mortgages and pays rates on that payed by his "real income".
So we have two main differences he has to pay rates from his income ( let us forget about new exotic forms of loans in the US like reversed mortgages etc that are unknown here) because of his debt and he has the risk of devaluation of his asset. The debt burden of households will play a role here and this number was more or less stable over the last years on a record level but no dramatic increases. That would only change with increasing rates but i doubt the FED wants to sink the american economy.
different economic decisions are often influenced or better can be explained with the help of the risk theory. Different people different predictions of the future and different willingness to take a risk and many amercians are not very risk advers in my opinion.
In the end a interesting topic but a individual problem only if many people are not reasonable there would be a problem.
taxes are also a very interesting topic looking at the situation in many developed countries and their debt because the deficit of today are the taxes for my children and grandchildren. It is good to reduce taxes but in the same way the government has to reduce the spending. They can not present the people the same social security infrastructure or national defence with lower taxes or better while creating huge deficits that someone will have to pay for in the future.
If someone follows Laffer lower taxes are possible and this is a good thing but please without these huge budget deficits.
