Refer
Grandfather Family Income Report - pg 1 - by MWHodges
Rate of Personal Saving Plunges 100% - to new record low - $985 Billion missing
If families have less inflation-adjusted income, despite mother working, then family personal savings must suffer as a consequence - unless, of course, families reduce their consumption. But, families increased consumption spending and, to cover this, they reduced savings to historic lows and increased household debt to historic highs. Dangerous Trend !!!
The chart at the left shows a 45 year trend of that part of disposable income that has been saved - - called 'personal savings rate'.
Note: prior to 1970 the rate of personal savings was rising smartly - - as were family incomes per the first chart above - despite most families then having but one wage earner while also living without increasing debt ratios (chart below).
Then, family incomes stagnated - - and the saving ratio stopped rising as seen in the left chart - - then started falling rapidly - - plummeting since 1992. As of June 2005, savings were at an all-time record low of zero percent !! $985 Billion in savings missing in 2004 compared to savings ratio of 2 decades ago. (realized capital gains, not calculated in the savings rate, mitigate this chart somewhat if one wishes to call such savings - - but the trend with and without is at all-time record lows).
While Household Debt Rises:
|
CONSUMER DEBT AND HOUSEHOLD DEBT |
| "The consumer balance sheet is stretched. Payments on consumer debt (mortgage loans, credit cards, and car loans or leases) are at an all-time high, as a percentage of disposable income." Robert Rands, The Vanguard Group, Wellington Management. |
 The left chart, from America's Total Debt Report, shows household debt as a share of national income from 1963 to today. Note the left side of the chart - - showing the household debt ratio was declining before 1970 - which means household debt was growing slower than growth of the total economy. We recall from the above charts that prior to 1970 family incomes were rising - but thereafter growth stopped for the following 25+ years. The left chart shows that family incomes stopped rising (1970) as household debt ratios stopped declining (at 53% of national income), then debt started upward, slowly - then took off upward like a rocket - to a historic record high debt ratios today (at 106% of national income, or $10.3 trillion - up 11.2% over prior year). Since household debt has risen at rates 90% faster than growth of the economy since the late 1960s when real median family incomes stopped rising, such suggests real equity & savings are not the driving force of economic size - - it is all debt driven. |
And Manufacturing Declines with an ever growing and burdensome income/payroll tax system hitting American Industry:
MANUFACTURING DECLINE
Some of the best paying jobs in America, with the best benefits, used to be in the manufacturing sector - - a period when America produced more than it consumed, exporting to the world with positive trade balances. No longer!!
The left chart shows the trend of the number of manufacturing workers as a percentage of all U.S. employees (non-agriculture) - - from 26% in 1960 to 10% in 2004, a 60% drop in the manufacturing ratio.
On a GDP basis the trend is the same negative > the U.S. manufacturing base declined from 30.4% of GDP in 1953 (when we had a trade surplus) to 12.7% in 2003 - a 58% drop in the manufacturing share of GDP - and more is foreign-owned than before. (Bureau Economic Analysis table b-12, Economic Report of President, appendix table)
As shown by the merchandise trade chart, whereas in 1960 U.S. goods manufacturing produced a $5 billion trade surplus - - 2004 merchandise trade had a $666 billion deficit. A powerful negative swing.
Bottom-line > manufacturing base shrinkage is a major negative regarding trade balance, and a major negative impact on U.S. economic and national security independence and future living standards.
Note the down-sloping trend of this chart far pre-dates the opening of China as a major world manufacturer. According to the Chinese Statistical Yearbook and economist Steve Roach of Morgan Stanley (4/05), the average Chinese manufacturing worker made 12,496 yuan in 2003, which translates into about US$29 per week. By contrast, average weekly earnings of US manufacturing workers amounted to $636 per week in 2003. With Chinese manufacturing wage levels only 4.5% of their US counterpart, my back-of-the envelope calculations suggest it would take about 20 years of sustained 15% annualized Chinese wage inflation to close half the wage gap with the US. Don’t kid yourself. Even with Chinese wage inflation, the economics of the labor arbitrage between the US and China remain compelling for as far as the eye can see.
Grandfather Tax Report - MWHodges
FOR 5 MONTHS EACH YEAR
That's 258% more months 'working for government' than it used to be, as shown in the chart.
The government taxes when you earn it, taxes you when you save it, taxes you when you invest it, taxes you when you spend it, and, when you die, they tax what's left over. What did they leave out?
5.1 months working for taxes is 43% of a year. In 1776 Thomas Paine argued that if a king demanded 50% in taxes, we wouldn't pay it. We are nearly there.
Who said the 'era of big government is over?'
TAXES INCREASE -
SAVINGS PLUMMET
This chart shows a relative comparison of personal taxes (percent personal income) to personal savings (percent disposable income).
The red curve on the chart is for personal taxes, where the ratio of taxes to personal income increased from 1959 and soared in the latter 1990s the ratio soared to near 15% by 2000, followed by a 2002 tax cut. Taxes increased 36% faster than personal income in this period until the 2002 cut.
The black line represents the portion of disposable income that was saved - the savings ratio. Note the saving ratio rose steadily up to the early 1970s, which was the same period of strong inflation-adjusted median family income growth, when most families were supported by but one wage earner. Savings rates plummeted during the 1990s - - savings reaching the lowest savings rate in history - - and that includes the Great Depression period of the 1930s.