The Savings-Rate Myth (Bogus assumptions based on a bogus government statistic)

NRO Financial ^ | Dec 23, 2004 | John E. Tamny

[x5452]

It's also the post where you tried to insinuate it was not simply an asset but a smart investment.

There are folks who sell an image of Christ on toast. That doesn't make toast a great investment either.

[Paradox]

I agree that they shouldn't be considered the same thing as a "hard" savings. The statistic should be left as it is. I am merely saying this explanation does provide some perspective about the situation.

[x5452]

Post the whole thing and I'll show you.

[Toddsterpatriot]

You claimed : Americans are overleveraged plain and simple.

Looking at American's debts without taking into account American's assets is just plain stupid.

[1rudeboy]

Forget it. All cars sold for $50 mil, huh? Where does this x character think he is?
On some forum that does not have a track-back feature?

[1rudeboy]

The whole thread? [hoot]

[x5452]

Money market accounts might be tolerable, but why get into splitting hairs. The savings amount should be regarded as the capital in the account not invested.

The only alternative would be to average the daily balance across 365 days and call that savings. Selectivly calling part of the plan savings and part of it not only further destroys the integrity of the data.

[conservative physics]

The way I see it, there are only two ways to interpret the data that America's savings rate is near an all time low:

1. That Americans are getting poorer (based on this data) or are somehow worse off than they've ever been. If this is your point, your wrong.

2. That Americans have changed the way they save and now have an extremely high amount of their net worth in non-liquid assets, which by their very nature tend to be more risky than cash in the bank. If this is your point, you could have a point... but US tax policy, combined with low interest rates has encouraged just this kind of behavior.

[x5452]

The whole post including his link to a car that sold for 50 million dollars.

[Toddsterpatriot]

Is this one of those "doom and gloomer arguing with a notion that exists only in his imagination" occasions?

He claimed we were overleveraged. We linked him to the Fed report showing household net worth was $51 trillion. He claimed the government stats were wrong. Then he claimed a car wasn't an asset. Assets are only those things that give you positive cash flow, doncha know?

He's been ranting ever since. He even posted the correct definition and then ignored it. He's a slightly more unbalanced than average doom and gloomer.

[sitetest]

Dear x5452,

I asked where someone called a car "savings." You gave me a link where Toddsterpatriot sarcastically says cars are never assets.

Is there a post anywhere where someone calls a car "savings"?

Thanks again,


sitetest

[webstersII]

"That this is so has a lot to do with the fact that at 69 percent, the supposedly “spendthrift” United States has the highest rate of home ownership in its history."

That's a joke. Home ownership is not really ownership if the bank owns the house and you pay them a mortgage!

The percentage of Home Equity has gone down and the article forgot to mention that.

[1rudeboy]

Assets are only those things that give you positive cash flow?

Yikes. Must be a huge fan of the Matrix movies.

[conservative physics]

look at it this way...

if the federal government abolished the income tax and replaced it with a 30% property tax that didn't exclude your primary residence...

20 years from now liberals would be screaming that homeownership is at an all time low !

People adjust their lives to avoid paying more taxes than they have to, it's a fact of life.

[Toddsterpatriot]

The percentage of Home Equity has gone down and the article forgot to mention that.

Yes, the percentage has plummeted to 57.1%.

Federal Reserve, page 110 of 124 pdf

[x5452]

I think Americans have changed where they've put their money however I would not call it savings.

I'd say a good percentage have put it into things of little or no future value which they are convinced have great value.

I'd also say that yes many are putting them into certain investments however I don't see how one could call the potential future returns of a poorly educated investor 'savings'. Most are investing in something highly tied to volatile markets. It's financial suicide to presume returns on non liquid investments are savings.

People used to get pension plans, now they're all getting retirement plans which are held in investments (thanks to ERISA). None of them are getting extra training how to keep that money growing or at least from shrinking. Yes there is value in these plans but I don't agree with modifying the method used to calculate saving to try to account for this value. Nor do I agree with the notion of folks calling that savings, or being encouraged to do so.

[x5452]

You clipped half the definition, and responded only to a portion of it calling IT the definition.

[1rudeboy]

Don't bother. You've probably seen it before on economics threads. Someone too lazy to construct a strawman argument, thinking that he can create an opposing view from thin air, and then attributing it to his opponent instead.

Voila! Cars become savings, free-market capitalists favor illegal immigration, blah, blah, blah. It never ends.

[x5452]

Calling something which gives you a monthly expense, and is constantly decreasing in value is stupid. It's like the folks pre-87 buying money losing properties to write off the loss on their taxes. Those were really great assets.

[x5452]

I am quite opposed to ilegal immigration thank you.