[frankthetank]

This is a good sign of a coming crash. When people lose jobs, where is the safety cushion going to come from? To me it seems, atleast in the short run, that economic meltdown is what we should be watching for...the writing is on the wall

Link

$this->bbcode_second_pass_quote('', 'A')SHINGTON (AFX) -- U.S. consumer spending grew 0.8% in June, offsetting a sizable 0.5% gain in incomes, the Commerce Department said Tuesday

The agency also reported that the personal savings rate fell to 0%, the lowest since a consumer spending binge in October 2001 and the second-lowest since the Great Depression

[FoxV]

$this->bbcode_second_pass_quote('', 'T')he agency also reported that the personal savings rate fell to 0%, the lowest since a consumer spending binge in October 2001 and the second-lowest since the Great Depression

[DantesPeak]

The BEA says the following about 0% savings:

$this->bbcode_second_pass_quote('', 'S')aving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. Personal saving as a
percentage of disposable personal income was 0.0 percent in June, compared with 0.4 percent in May.

[I_Like_Plants]

Yeah, the economy's doing great!

Rememer the Great Depression was preceded by the Roaring 20s and the powers that be were pretending things were going great even when they obviously were not.

Also, there's a huge underclass in the US, Welfare and disability etc programs actually prohibit saving. For the underclass, saving makes no sense anyway, anything they accumilate will be taken by family members and "friends", the law, etc. For that class of people, saving is like banging their heads against the wall - if they get anything, spend it and enjoy it or try to save it and not even have it at all. I've lived at this class and among such people myself and I can tell you, as strange as it sounds, saving really makes no sense in that environment.

I'm curious to know if house appreciation is counted as "saving" because if so, just a leveling off of prices will put us in a huge negative savings situation.

[pup55]

BEA Report

Here's the actual report.

The difference in monthly savings between May and June (32 billion) was about the same as the amount spent on "durable goods" in June (30 billion).

So, it looks like instead of saving, everybody went out and bought a new car.

[Raxozanne]

What? And its not even Christmas yet....

[BabyPeanut]

Might as well spend it all while it's still worth something. When the grocery stores are all empty what will your money be worth?

[nth]

This is misleading if you want to equate this with cashflow or how much money people have in the bank or other savings account. People have money stored away, but they also have debt. Which is stupid according to some financial planners, but nevertheless, most Americans do have a nest egg hidden, but don't have any net savings.

[SD_Scott]

Savings rate? HA! If someone has a $100,000 loan on a house and they have $20,000 in cash, thats negative. They're $80,000 in the hole.

[emersonbiggins]

$this->bbcode_second_pass_quote('BabyPeanut', 'M')ight as well spend it all while it's still worth something. When the grocery stores are all empty what will your money be worth?

[cube]

$this->bbcode_second_pass_quote('I_Like_Plants', '.')...........
For the underclass, saving makes no sense anyway,
.............

[bruin]

CNN chimes in with:

$this->bbcode_second_pass_quote('', 'O')ne of the factors driving down the savings rate is rising energy costs, said Robert Brusca, economist with FAO Economics. He estimates the rate would still be in the neighborhood of 2 to 2.5 percent seen two years ago, before energy prices started moving higher.

[nth]

Oil has already ruin many people's lifestyle and economy.

Look at the reduce oil demand in several developing economies.
They are fueled by rising prices of oil and nothing else.

Just because US seems somewhat immune doesn't mean Campbell's prediction of End of Cheap oil is ruining the world's economy is not occurring.

[smiley]

$this->bbcode_second_pass_quote('', 'A')ctually saving makes no sense (in the USA) reardless of what class you're in. The inflation rate is higher then the interest rate. So you're actually losing money by putting money in the bank.

[strider3700]

I'm with smiley here, I have about $10,000 in the bank making 2.4% interest I have a 7 month old mortgage of $113,000 or so at this point that is locked in at 5.4% for another 4 years 5 months. Yes when my annual date comes up it would make good financial sence to give up the $10,000 and put it into the mortgage as an extra payment, but it would totally destroy my Emergency financial plans. So I sit there making interest. It's worth about 1 days worth of wages at the end of the year.

I'm assuming that debt is not however part of the savings rate measurements. I'd assume that it's measuring savings based on the percentage of your income that you bank rather then spend each month. In that case my savings rate is about 30% although home improvements hammer that little slush fund regularly.

It's scary that people aren't saving anything in the states. The question though is how much could they save if they cut back on crap that they don't need. There is a big difference between having nothing left over after paying rent/food/heat.. and not having anything left because the new tv took what was left in last months check

[DantesPeak]

As a point of information, the regular savings rate includes realized capital gains - but not unrealized ones. I think the objective here is to measure cash earnings. However this savings rate dosen't take into consideration the rapid growth in household debt since 2000. Increased debt repayments actually understate just how bad the balance sheet of the average consumer is.

With no buidup of savings and PO, I see in 10 or 20 years a lot of people living off the social security system, and they won't be very happy with the amount they get.

[Teclo]

When I see things like this I'm thinking the 0% savings is an average of all Americans. In reality won't a significant number of people be doing a lot worse than this?

It does seem obvious that in a consumer driven economy the last line of revenue open is consumer debt. Thats why they flooded us with cheap loans and so long as it kept consumption growing I'm assuming our interest payments have steadingly been rising as a % of net income. This means no spare cash to save and in effect the maximum revenue possible is for every consumer to spend all he earns. Mission accomplished

The next stage is to spend more than is earned which is easy to do - but I would be suprised if the majority of us who have debts didn't at that point start to cut back on consumption either to avoid getting more in debt or in realisation they had to start paying it back or from simply being maxed out

Either way further economic growth from the consumer is finished, economy slows and can't increase wages leading to a catch 22. With a national debt that needs a fair GDP growth just to service I just can't see US avoiding another depression

The recession probably began about 5 years ago. I think people will not like living poorly but wouldn't take giving up their freedom of expression gained during the time of growth. Its time to stand on our feet not be beaten down again

Teclo

[frankthetank]

That cut back in consumption (which has to come sooner or later) will be seen in stock prices once earnings come in and stocks go down.

On top of this low savings rate, you have gas prices/heating oil prices rising along with the possibility of a long cold winter and you've got t-r-o-u-b-l-e!

That really sucks about being taxed twice on earnings. I have no debt and stick some money away and therefore accrue interest. Then i'm taxed on it. I guess i never realized how bad the government fucks people who try to follow the right path

[CrudeAwakening]

Anyone know how much banks are taxed on the interest they earn on your mortgage?

[MonteQuest]

$this->bbcode_second_pass_quote('I_Like_Plants', 'I')'m curious to know if house appreciation is counted as "saving" because if so, just a leveling off of prices will put us in a huge negative savings situation.