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Thread: What Does it Mean, Saving Rate drops to 12-Year Low when 50% of Americans Don’t Have

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    What Does it Mean, Saving Rate drops to 12-Year Low when 50% of Americans Don’t Have

    by Wolf Richter • Jan 29, 2018

    Or what the averages are hiding.
    We will start with income and see what’s left over, and for whom.

    Personal income increased by 4.1% in December from a year earlier, the Bureau of Economic Analysis reported today. This includes all income received by all persons from all sources, such as from labor, financial assets (dividends and interest income but not capital gains), business activities, homeownership (rentals), government transfers, etc.

    “Real” personal income — adjusted for inflation via “chained 2009 dollars” — rose only 2.37%. This is for the US overall.

    Per-capita “real” personal income – which accounts for 0.71% population growth in 2017 and measures income per individual – rose only about 1.7%. If the inflation measure even slightly understates actual inflation as experienced by these individuals, their personal income growth might go away entirely.

    snip

    All these surveys say the same thing: about half of Americans have little or no savings though many have access to some form of credit, including credit cards, pawn shops, payday lenders, or relatives.

    snip

    When the overall saving rate drops it means that the surge in borrowing at the bottom 60% or so is no longer outweighed by the growth in savings at the top.

    But economic risk lies at the lower echelons – with people who cannot afford to lose their jobs. If something goes wrong in the economy, it’s at there where defaults are happening and where job losses hurt the most. This is why these low saving rates were a red flag before the Great Recession – not because households at the top were saving less but because households in the lower 60% of the economy were stretching further to borrow to fund their spending and to deal with existing debts.

    https://wolfstreet.com/2018/01/29/sa...-have-savings/
    Thanks from MaryAnne

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    Veteran Member cpicturetaker12's Avatar
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    IT SUCKS!! Does not bode well at all.

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    Dick with my Buzz...Try DebateDrone's Avatar
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    This means what we have know since the great recession that real wages and real savings has not reached the average American.

    We have known for years that 80 percent of the wealth generated by all goes to the upper 1% and that the lower 50% have not seen have not seen any real wage increases in years.

    The fact is that markets and businesses and stocks did very well under Obama, lets see if Trump can generate business to trickle down some of that wealth downward.

    High consumer confidence does not feed the bulldog.


    https://www.oxfam.org/en/pressroom/p...ated-last-year
    Last edited by DebateDrone; 31st January 2018 at 07:57 AM.
    Thanks from MaryAnne

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    Veteran Member MaryAnne's Avatar
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    Fewer jobs created in 2017 than in 2016

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    We choose both. Amelia's Avatar
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    We bought our house near the end of 2016. So that and associated costs lowered our savings in 2017.

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    Quote Originally Posted by DebateDrone View Post

    High consumer confidence does not feed the bulldog.


    https://www.oxfam.org/en/pressroom/p...ated-last-year
    Sure it does, we are a consumer driven economy.

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    Quote Originally Posted by MaryAnne View Post
    Fewer jobs created in 2017 than in 2016
    Fewer jobs created in 2016 than in 2015 and fewer than 2014.

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    Quote Originally Posted by Libertine View Post
    Fewer jobs created in 2016 than in 2015 and fewer than 2014.
    Trending isn't it!!

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    Veteran Member bajisima's Avatar
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    Lets also remember that boomers are retiring and a new generation is coming up that is deep in debt. Student loan payments often take into account savings, so most kids with debt dont or cant save after the payments. Likely will get worse over the next decade.

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    People are investing and speculating more than saving right now and dozens of years now because the prime rate is near zero and just a bit above that is the interest rate for saving.

    My first house was purchased with an interest rate of 8%. Back then it was pretty easy to get 6% return on a savings account and bonds, t-bills etc paid more. You could invest in safe and conservative investment vehicles because they paid something. However the government has been the biggest borrower for decades now and it needs cheap money so everyone becomes a speculator to get a return since saving is a losing game. Give then real rate of interest your money loses value in a savings account.

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