With many savers putting away retirement savings, and some buidling equity in their home by paying off their mortgage, I would guess at least half of consumers are spending substantially (5% or more) than they make.
Even though consumers may borrow more in the future, they now have to overcome the extra debt payments they took on in the last few years.
Consumers may be close to their debt payment limits already - no matter how much a home is worth they still have to pay back all the extra money extracted from home refinancings.
PO will push the whole economic system over the edge faster, but its going to have quite a fall even if energy prices remain the same.
PeakOil is You
US Savings rate falls to 0%
by DantesPeak » Tue 02 Aug 2005, 23:11:06
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by Leanan » Wed 03 Aug 2005, 09:55:51
CNN has an interesting article about it:
http://money.cnn.com/2005/08/02/news/ec ... /index.htm
Their take: People are using their homes as ATMs. One reason they are being forced to do this is high energy costs.
http://money.cnn.com/2005/08/02/news/ec ... /index.htm
Their take: People are using their homes as ATMs. One reason they are being forced to do this is high energy costs.
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by BabyPeanut » Wed 03 Aug 2005, 12:57:21
$this->bbcode_second_pass_quote('Leanan', 'C')NN has an interesting article about it:
http://money.cnn.com/2005/08/02/news/ec ... /index.htm
Their take: People are using their homes as ATMs. One reason they are being forced to do this is high energy costs.
http://money.cnn.com/2005/08/02/news/ec ... /index.htm
Their take: People are using their homes as ATMs. One reason they are being forced to do this is high energy costs.
Does it make sense to use home equity credit to purchase EnergyStar stuff, insulation, etc.?
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by strider3700 » Wed 03 Aug 2005, 16:49:51
That would depend on the rate of payback. If you have a really bad house the impovement may save enough to pay for themselves quicker then the interest adds up but I have my doubts. Anything that you need to borrow cash to do is probably a large enough expense that it will take a long time to pay back.
I pretty much can't justify paying interest on anything other then my mortgage, I hate the fact that I needed to get one of those as well but saving enough to buy a house outright didn't make sense when I was paying rent.
I pretty much can't justify paying interest on anything other then my mortgage, I hate the fact that I needed to get one of those as well but saving enough to buy a house outright didn't make sense when I was paying rent.
shame on us, doomed from the start
god have mercy on our dirty little hearts
god have mercy on our dirty little hearts
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by jdmartin » Wed 03 Aug 2005, 17:36:25
$this->bbcode_second_pass_quote('strider3700', ' ')
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
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
First off, I agree with both of you - savings is a safety cushion, regardless of whether inflation destroys some of the value of it. There are some things one could invest in (money markets or CDs) that will generally neutralize inflation, or mitigate it more than the interest paid by the savings account. Either way, what would be your choice if not to save it? Spend it. As has been stated, it is almost assured that whatever you buy will depreciate faster than inflation will destroy the value of your savings.
One thing, though - if everyone cut back on crap they don't need, it would probably wreck what's left of the economy. The only way to keep this type of economy going is to circulate dollars. If everyone quits circulating some dollars, the cumulative effect would be staggering. The problem is that most people don't have much dollars anymore. Back a ways people had extra dollars to save AND circulate by buying crap they didn't need (washing machines or Fruit loops). Today, it's a choice - buy crap you don't need OR save (although for many there's no choice at all).
After fueling up their cars, Twyman says they bowed their heads and asked God for cheaper gas.There was no immediate answer, but he says other motorists joined in and the service station owner didn't run them off.
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by Kez » Wed 03 Aug 2005, 17:42:54
ING direct's APY is currently 3.15%, and they make it easy to transfer the money from your bank account to their account. Still, it's a pretty lousy rate when you think about it.
Last year I cancelled my mortgage's escrow account and instead put the money in there. It sucked having the mortgage company require me to have $1,000 or so in their silly account at all times, even after all the bills were just paid, AND they got to earn interest on my money. So now I earn a measly 3.15% on it, and just transfer the money when the property taxes are due. Better than nothing.
I imagine things like this are considered savings, even though I'm only saving it to pay off the big bill that I know is coming later. Things like this really screw up the real numbers in all these reports.
Last year I cancelled my mortgage's escrow account and instead put the money in there. It sucked having the mortgage company require me to have $1,000 or so in their silly account at all times, even after all the bills were just paid, AND they got to earn interest on my money. So now I earn a measly 3.15% on it, and just transfer the money when the property taxes are due. Better than nothing.
I imagine things like this are considered savings, even though I'm only saving it to pay off the big bill that I know is coming later. Things like this really screw up the real numbers in all these reports.
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by smiley » Wed 03 Aug 2005, 17:58:37
$this->bbcode_second_pass_quote('', 'W')hen 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?
I'm wondering how they calculate this stuff. The savings rate should be asymmetrical, that is the higher incomes should be more represented in the savings rate than the lower incomes.
It is the same with income. The ultrarich will be overrepresented. One person with an annual income of one million will raise the national average wage by something like $0.10 per person per year. Therefore one should always look at the median income not the mean one, as the latter is seriously skewed by the higher incomes.
So if this is really a mean average, then what would be the median?
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by nth » Wed 03 Aug 2005, 18:01:38
The way the savings rate is calculated is by taking total take home pay minus spending.
So they don't measure savings accounts and such.
All this indicator does is tell us US consumer's spending is rising faster than income rising, and they now spend all the money they made.
This personal income does not include capital gains, but includes interests and dividends.
So they don't measure savings accounts and such.
All this indicator does is tell us US consumer's spending is rising faster than income rising, and they now spend all the money they made.
This personal income does not include capital gains, but includes interests and dividends.
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by smiley » Wed 03 Aug 2005, 18:36:53
$this->bbcode_second_pass_quote('', 'T')he way the savings rate is calculated is by taking total take home pay minus spending.
That is what I mean. Unless your name is Jackson or Spears and you are renting theme parks for your birthday parties there is only so much money you can spend.
The people who are above that limit will contribute greatly to the savings rate as you just defined. People like Gates, Heinz, and Buffett will be overly represented, simply because it is not humanly possible spend their kind of income.
Just to give you an idea of the money involved: the top 1% earners represent 17% of the national income
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