"The latest chant is that ... a day of reckoning marked by a housing-price crash and an overwhelming debt burden is headed our way. This is utter nonsense."
The "but you're excluding housing & stocks" meme was another one of the great rationalizations of the bubble years.
CR, perhaps during the holidays (on a slow news day) you could do a post on those (e.g., "Housing always goes up") and then everyone could contribute in the comments. I'm sure we could put together quite the collection, and get a good laugh at the same time.
Savings rate is just income minus expenditures, not necessarily what people put into savings accounts or whatever. The perversity of ZIRP is such that even with high savings rates, people will lose incentives to keep money in banks, and thus the high savings rate does nothing productive for the economy.
"Manager of failed money market fund says SEC to charge company with securities laws violations
NEW YORK (AP) -- Reserve Management Co., which is facing a slew of investor lawsuits after its money market fund fell below a key safety benchmark, said late Tuesday the Securities and Exchange Commission plans to charge the company and its management with violations of securities laws."
Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.
None of this has happened. The Federal Reserve has effectively mopped up excess cash and calmed inflation expectations. Thats why bond rates are hovering around 4 percent, with most mortgage rates about a point higher.
Meanwhile, the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they havent done their homework. If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments havent changed much during the past three and a half decades.
As they watched house porn on SKY today they said the Outlaws will need to now redo these programs as the prices are all wrong.
I said they won't be able to as the people presentnig will all be in jail or labour camps in 5 years....no one laughed and I got one of those looks from my beautiful wife.
however last night when I said I had no debt and quite a bit of savings i was told , yes but you don't own a house...i said yes I knew there was another good thing I'd forgotten....you could have heard the equity drop on the family home in the silence that followed
while you are at the malls, i'm sipping your milkshakes. I'd be drinking them but unfortunately there isn't much there.
cue sound of straw sucking at the bottom of gelatinious Mcdonald's frozen milky drinky thing of choice. Or, if still at the malls, sound of last remnants of Orange Julius.
If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments haven't changed much during the past three and a half decades. ~LK crispy&cole | Homepage | 12.24.08 - 12:03 pm | #
Hmmm. What happened about '84? Looks like there has been a downtrend in the savings rate since then. I won't say its Reagonomics until I know so. Another Ben, Ben Franklin, said, "Neither a borrower nor a lender be."
"Meanwhile, the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they havent done their homework. If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments havent changed much during the past three and a half decades"
SEC Cox
Cox said the biggest mistake of his tenure was agreeing in September to an extraordinary three-week ban on short selling of financial company stocks. But in publicly acknowledging for the first time that this ban was not productive, Cox said he had been under intense pressure from Treasury Secretary Henry M. Paulson Jr. and Fed Chairman Ben S. Bernanke to take this action and did so reluctantly. They "were of the view that if we did not act and act at that instant, these financial institutions could fail as a result and there would be nothing left to save," Cox said.
Since I was short financials does this mean I get my money back????
You're killing me. This is exactly the trail of conversation I'll be trying to stop myself from going down tomorrow at the family get together. And my wife will be ready with "the look" if I can't stop myself....
...you could have heard the equity drop on the family home in the silence that followed
I love Christmas, don't you....
jamie
God on ya Jamie. Now get pissfaced drunk at dinner, insult all at the table, puke on your plate, then pass out face first into your puke filled plate. This will assure you peaceful holidays for years to come.
Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.
crispy&cole | Homepage | 12.24.08 - 12:03 pm | #
C&C, what world does this guy live in?
What world does that entire channel live in?
I know they all see the numbers and the numbers don't lie.
I get that they make zillions working for the TV, but come on! How do you get up every day, esp. the early ones like Erin B. and look yourself in the mirror, knowing that today I have to come up with yet some sh!t to spin because the eCONomy is so bad?
Again, I know we all have a price, but at what point do you save enough of that easy TV money and then say goodbye?
Look, even Liar Liar of NAR fame has finally started to show signs of cracking after getting off that ship.
In the tough recessions of '74 and '82, the rate rose to 12%.
In the depression we are now entering it will rise even higher. Boomers facing imminent (and perhaps forced) retirement with wealth depleted by stock and real estate collapses, and interest rates kept at zero by financial system bailout, are going to realize they must save at very high rates to avoid future poverty.
PCE will plummet, and much of the vast network of warehouses and stores built to distribute the goods formerly bought on credit will go vacant. And the people who used to work in them will need to find other ways to make a living.
jamie writes:
however last night when I said I had no debt and quite a bit of savings i was told , yes but you don't own a house...i said yes I knew there was another good thing I'd forgotten....you could have heard the equity drop on the family home in the silence that followed
I love Christmas, don't you....
jamie | 12.24.08 - 12:07 pm | #
Jamie, you cruel SOB. But I def. like your style.
How telling is it when everyone shuts up. They know you made the right moves and they have no response because they are pissed that can't drag you down with them.
They hate that you have no debt, a an actual savings account, and don't have to worry about a new water heater or tranny for the car because you don't have to pay some slime ball at Doublewide every month to "borro" a home.
you could have heard the equity drop on the family home in the silence that followed
I love Christmas, don't you.... \t jamie | \t \t \t \t12.24.08 - 12:07 pm | # A road I've been down myself. FWIW, I'd rather have a peaceful holiday than win the arguement. I did put up with my share of bullshit during the bubble years for not buying, but my family won't touch the subject with me anymore. They're too smart to bring it up, and I'm to smart to rub it in.
As the chart shows, our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%. History will vindicate Jimmy as sure as it will eviscerate Bush.
Health care expenses are in large part a result of our own cause. Smoking, sitting and eating and watching TV. Overweight American citizens. Worshiping money with stress syndrome. I once went for a regular check up at Kaiser in LA and Dr. Said that STD health care issures kept her in business. She also said that on Item alone was a major part of her client's issues on health. Cause and effect.
Kudow writes:
The focus of the Committees policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserves balance sheet at a high level. (Italics mine.)
The Fed goes on to say it will purchase large quantities of agency debt meaning Fannie and Freddie and more mortgage-backed securities (quite possibly toxic assets). In other words, it wants to drive mortgage rates down. Whats more, the Fed may buy long-term Treasury securities, also to drive bond yields lower. And it will purchase the Term Asset Backed Securities Loan Facility in order to finance consumer-related bonds and pump liquidity to consumer lenders.
The message here is that Bernanke & Co. is locked and loaded, ready to shoot every last bullet to help credit markets and the economy. In particular, the Fed is formally adopting a Milton Friedman-type approach that is directed at expanding its balance sheet and stimulating the economy.
The Feds balance sheet already has more than doubled from roughly $900 billion to $2.2 trillion. For all we know it may soon double again. Money-supply measures are already growing at 7 to 8 percent.
And while some economists worry about higher future inflation from all this money-creation, Tuesdays consumer price report actually showed deflation of 10 percent annually over the past three months. That gives the central bank ammunition to ignore inflation and aim instead for a massive monetary easing.
Will it all work? In the short-run it may. But is a near-zero interest rate, and even more pump-priming, really the best longer-term solution? Its still troubling that Fed policy lacks a true anchor or compass. In the past, targeting the economy alone has resulted in higher inflation. Thats why many conservatives wish the central bank would keep a sharp eye on the value of the dollar and commodity prices (including gold).
While energy and other commodity prices have experienced a wicked plunge since the summer, in recent days ahead of the Feds new policy decision the dollar has fallen and commodities have rebounded. But the question is this: In the future, will the Fed be able to unwind its huge cash-liquidity injections? The same can be asked about government bailouts for banks and quite possibly Detroit. Yes, this is an emergency. But its also unprecedented government intervention in the economy. How we restore traditional free-market capitalism remains unsaid and unknown. That is worrisome.
Stocks cheered the Feds move by rallying nearly 400 points on Tuesday. Savvy investors Ken Heebner and Robert Doll two financial and political conservatives strongly endorsed the Fed moves on CNBC. This massive easing almost certainly underscores the likelihood that stocks bottomed on November 20. Both the monetary surge and the upturn in equities are pointing to economic recovery next spring or summer.
Meanwhile, on the fiscal policy front, everyone has been focusing on Obamas huge big-government-spending infrastructure play. But Team Obama is also drawing up plans for a massive purchase of mortgages in order to get long-term borrowing rates down to 4.5 percent a full percentage-point drop. The specifics are sketchy, but theres no question the Obama Treasury, led by Tim Geithner, will be working hand-in-glove with Geithners former Fed boss Ben Bernanke to drive down mortgage rates and stop the housing slump.
Perhaps Bernanke himself scored a few points with his historic shock-and-awe easing move. Its as though Bernanke is telling the new president: Hey, Im on your team.
But I still believe the best economic stimulus would be a move to cut tax rates across-the-board for individuals and businesses. No matter how much money the Fed prints, or how many roads or mortgages Uncle Sam buys, none of it creates new incentives for private enterprise, risk-taking, and investment.
By focusing on net wealth (inflated by the housing bubble and excessive stock prices), Mr. Kudlow completely missed the biggest story of our time.
This "missing of the story" is completely intentional, of course.
I assume CR did not spell out this because it is completely and totally obvious, but I've learned not to assume clarity among my fellow Americans: it might be better to explicitly explain that teevee has become a mouthpiece for Con propaganda, because there are a few out there who haven't caught on.
Former real estate bull admits, I spun
Working for realtors, David Lereah was famously optimistic. Not anymore.
By Donna Rosato
As chief economist for the National Association of Realtors, David Lereah was famously optimistic. Now a private consultant, hes abandoned what he calls the positive spin.
Q: Were you wrong to be so bullish?
A: I worked for an association promoting housing, and it was my job to represent their interests. If you look at my actual forecasts, the numbers were right inline with most forecasts. The difference was that I put a positive spin on it It was easy to do during boom times, harder when times werent good. I never thought the whole national real estate market would burst.
Q: The NARs latest forecast calls for a slight increase in home prices next year. Thoughts?
A: My views are quite different now. Im pretty bearish and have been for the past year and a half. Home prices will continue to drop. I think well see a very modest recovery in sales activity in 2009. But weve still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. Itll take a long time to get back to the peak prices we saw in many markets.
Q: Any regrets?
A: I would not have done anything different. But I was a public spokesman writing about housing having a good future. I was wrong. I have to take responsibility for that.
I'm gonna go an $8.00 latte on my Amex and think about this. Hope my brain doesn't explode.
Nostrovia,
Comrade Misean is Dope
I was in a Dunkin Donuts last week. The guy in front of me pulled out his Amex to pay for a cup of coffee and 2 donuts, $3. The guy behind the counter wouldn't take it. The dude didn't have the $3 and after hollering at the guy stormed out w/o his coffee and donuts
I was in a Dunkin Donuts last week. The guy in front of me pulled out his Amex to pay for a cup of coffee and 2 donuts, $3. The guy behind the counter wouldn't take it. The dude didn't have the $3 and after hollering at the guy stormed out w/o his coffee and donuts
Anonymous | 12.24.08 - 12:29 pm | #
Before some get all snotty about rewards, let me just say that if you are that deperate to charge 3 bucks to get back 10 cents in rewards you are as bad as the person who wastes 2 bucks on gas to save 25 cents on toilet paper in the town next door.
CRIKEY! JUST PAY FOR YOUR DONUTS AND COFFEE W/CASH!
I am serious. This is pathetic.
AND DON'T GIVE THE CASH CRAP, EITHER.
We are not totally cashless yet and remember, esp. with AMEX that store owner will wait to get his money from them (BUFFET)!
I've never understood the visceral hatred that American conservatives have for Jimmy Carter. I mean isn't fiscal responsibility, saving, frugality the bedrock of conservatism?
Hey, don't knock it. I get 3% cash back on restaurant purchases. Nice little end of the year bonus when you travel as much as I do.
Max | Homepage | 12.24.08 - 12:32 pm | #
Okay, restaurant. I get 3% back on $100 meals.
This was freggin Dunkin' Donuts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1
No matter what people in power do, home prices will drop until they are affordable with a down payment and proof of payment.
Cars will sell to the public as the public demands. That is wonderful. Now the SUV demand is up again. Low gas prices. This free society is a wonderful place. Also the TV and internet is shouting from the housetops all about the private affairs of everyone. That is wonderful. No one can hide forever. The free press is wonderful.
You calculated risk are too too negative. You have Good show of information of course.
USA is the greatist country in the world and all should be greatful who live in the USA. Interesting all nations want to get into the USA. Hmm......
Pissed off in California writes:
"Hey, don't knock it. I get 3% cash back on restaurant purchases. Nice little end of the year bonus when you travel as much as I do."
Is 3% back on McD's really worth the hassle?
Pissed off in California | 12.24.08 - 12:33 pm | #
Are you saying that he considers Mickey D's fine dining?
I can haz bailouts writes:
I've never understood the visceral hatred that American conservatives have for Jimmy Carter. I mean isn't fiscal responsibility, saving, frugality the bedrock of conservatism?
I can haz bailouts | 12.24.08 - 12:34 pm | #
That is in an alternate universe without NeoCON men!
Yeah, that RR was some conservative. What 2 trillion national debt by the time he was done?
(Reuters) - Veteran banking analyst Richard Bove said he expects housing prices in the United States to stabilize and/or rise after a likely boom in mortgage refinance, as mortgage rates fall and loan applications increase.
"It is quite likely that the country is about to enter a new mortgage refinance boom," the Ladenburg Thalmann analyst wrote in a note to clients.
"The Treasury and the Federal Reserve have created an environment which makes this development almost impossible to avoid," Bove said.
Hey, a couple of years ago on the holidays, I persuaded my Brother in law NOT to buy in investment property. He was all "What's the WORST that can happen? The bank takes the house back." I then pointed out that we live in a recourse state, so that after the sell it they can come after you for the REST of their money.
USA is the greatist country in the world and all should be greatful who live in the USA. Interesting all nations want to get into the USA. Hmm......
41Cadillac
" Anonymous writes:
As the chart shows, our last honest president [sic], the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%.....
Anonymous | 12.24.08 - 12:22 pm | # "
If we had a savings vehicle that paid 18% today, as they did around 1980, we'd probably see a higher savings rate now. At this point it "literally" doesn't pay to save
"If we had a savings vehicle that paid 18% today, as they did around 1980, we'd probably see a higher savings rate now. At this point it "literally" doesn't pay to save ;-)"
Well it does if you getting -20% on all your other investment options.
If we had a savings vehicle that paid 18% today, as they did around 1980, we'd probably see a higher savings rate now. At this point it "literally" doesn't pay to save
xxxxx
I can haz- What I find interesting about Carter Hatred is the fact the he was probably one the two most avowedly Christian presidents in modern times. Yet he is regarded as some sort of Antichrist by the evagelicals who put W in office.
Agree on Carter as an underrated President...the funny thing about CONservatives is how they claim interest rates and the recession occured during Caters term...the peak in rates was in 1982 and the recession dates are during RR's term...historical revionists are what make CONservatives so hated by me.
" Pissed off in California writes:
"If we had a savings vehicle that paid 18% today, as they did around 1980, we'd probably see a higher savings rate now. At this point it "literally" doesn't pay to save ;-)"
Well it does if you getting -20% on all your other investment options.
Pissed off in California | 12.24.08 - 12:40 pm | # "
For that matter, if the currency is deflating, there is a "real" return on 0% interest. However, the number in your account doesn't get bigger, which was my point, and there was a smiley face afterward.
" Jim A. writes:
I can haz- What I find interesting about Carter Hatred is the fact the he was probably one the two most avowedly Christian presidents in modern times. Yet he is regarded as some sort of Antichrist by the evagelicals who put W in office.
Jim A. | 12.24.08 - 12:40 pm | # "
Roll in the mire long enough and the worms get into your brain...or so I've heard. Comrade Misean is Dope | 12.24.08 - 12:45 pm | #
True, true. Waiting for a true admission from these guys is like waiting for Godot. You'll never know what's in their heart of hearts, but for those who crave the spotlight, being forced into the shadows is punishment enough. At least his Momma still loves him.
Perhaps the more interesting flaming brown bag of crap that Obama will find buring on his door step is a rapidly deteriorating semi-failed Russian state about to invade/shake-down the rest of its neighbors for cold, hard cash. next Ukrain:
The question is not whether people are saving. I find that false. but whether people are paying down debt. Probably what we're seeing in the household wealth equation. Debt is lowered, but savings not necessarily there...
But I agree with Elvis, if they are not already doing so, lock in those prices today for rice, flour, corn-meal, dried fruit & nuts.
Based on what I've witnessed in about half a dozen locations around the US, I will hazard a guess that this bump up in savings will prove to be temporary. For a couple of months, during the continuous drops in the stock markets in October and November, I noticed drastic reductions in retail consumption. By the end of December, the shock seemed to have worn off and people seemed to be consuming to their capacity again.
The savings rate is probably headed up. But one reason to not expect it to be lower than historical levels in the 1970s is how pensions are handled.
People who receive pensions are running down pension fund assets. The money they get is therefore not considered income to the household sector. Therefore, all spending by pensioners is treated as dissaving and subtracts from the savings made by other households.
Given the changed demographics of society, this is one reason that the savings rate will be lower than in previous eras.
It looks like savings from lower gasoline prices is showing up as savings - as opposed to other consumption - and this process of increasing savings is a necessary step towards restoring healthy household balance sheets. -CR
Interesting charts as usual. Got one question though... You see the big lurch in savings, beginning with the Q2 at the same time that gas prices were going stratospheric. It would seem that would be attributable to something other than fuel savings. Stimulus checks? That's my bet. The next little lurch by Q3 says paranoia.
Medvedev is simply repeating the lines from the star of the show, Mr. Putin as a good understudy must do. I fear however, in Russia, understudy also means lampost decoration.
As the chart shows, our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%. History will vindicate Jimmy as sure as it will eviscerate Bush. Anonymous | 12.24.08 - 12:22 pm | #
I just bought another chunk of SRS at $57. Merry christmas. No need to post your "double shorts sux" bits. I understand all that. I"m just trying to take Popeye's money.
So if savings rates go up. It will recapitalize the banks and maybe they start lending again. But it might do nothing for the equity markets right? That would be investment right? What about buying bonds? Investment?
Jimmy Carter the individual vindicated Jimmy Carter the President ... not the other way around.
Anonymous writes:
As the chart shows, our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%. History will vindicate Jimmy as sure as it will eviscerate Bush.
Anonymous | 12.24.08 - 12:22 pm | #
[blackhat writes:
The question is not whether people are saving]
I agree. I think BKs & defaults are destroying revolving debt faster than it's accumulating. It's just more evidence of the violent convulsions of a cratering economy evident in equities & bonds.
I've never understood the visceral hatred that American conservatives have for Jimmy Carter. I mean isn't fiscal responsibility, saving, frugality the bedrock of conservatism? I can haz bailouts | 12.24.08 - 12:34 pm | #
Problem is that he "walked the walk" and paid the price; Pseudo-Conservatives just "talk to talk", then skip out just before the bill comes due leaving the rest of us to cover the tab. Please refer to the discussion of truth, lies, and bullshit from several threads ago. The Pseudo-Conservatives are just worthless bullshit artists. Terrified that everyone will realize how worthless they are and ignore them.
I was in a Dunkin Donuts last week. The guy in front of me pulled out his Amex to pay for a cup of coffee and 2 donuts, $3. The guy behind the counter wouldn't take it. The dude didn't have the $3 and after hollering at the guy stormed out w/o his coffee and donuts
Anonymous | 12.24.08 - 12:29 pm | #
Don't forget that merchant would likely have to give up 3 to 6 percent to the CC companies for the privilege of taking their cards, not worth it. At 4 dollars for gas, the stations realized they were getting shafted by the fees, too.
ades writes:
"So if savings rates go up. It will recapitalize the banks and maybe they start lending again. But it might do nothing for the equity markets right? That would be investment right? What about buying bonds? Investment?"
The savings will re-liquify the banks, not necessarily re-capitalize them. (Re-capitalization implies that equity goes up. If deposits go up, all that means is that the bank is more liquid.)
The household sector tends to "save" little in equities. Why - for every buyer, there is a seller. So when person A buys some equity from person B, there is no net purchasing of equity by the household sector.
The only way for the household sector to save in equities is for the corporate sector to issue them new equity (or sell whatever equities they hold). In recent years, the flow was the other way - the corporate sector was (stupidly) a net buyer of equities from households.
Denninger redeemed himself this morning with an excellent analysis of why the current stimulus plan (Keynes) will either fall flat or merely postpone the inevitable collapse of the economy.
"I was in a Dunkin Donuts last week. The guy in front of me pulled out his Amex to pay for a cup of coffee and 2 donuts, $3. The guy behind the counter wouldn't take it. The dude didn't have the $3 and after hollering at the guy stormed out w/o his coffee and donuts
Anonymous"
I don't have cash all the time. Instead of getting charged a fee at an ATM, I'll gladly charge $1.50 at 7-11.
"You calculated risk are too too negative. You have Good show of information of course.
USA is the greatist country in the world and all should be greatful who live in the USA. Interesting all nations want to get into the USA. Hmm......"
You do know that sucking up doesn't help with a green card application ?
12th-I'm hoping friday stays flat for my next buy in...
I'm hoping those crooks drive it to $40. I'll buy more. And i started buying in at $120 and have bought all the way down. I'm down $50,000 so far. they amuse me. I can remain irrational longer than they can remain solvent.
Persecuted Comrade Anonymouse writes:
We are all Tiny Tim now
Persecuted Comrade Anonymouse
Is that Dickens' Tiny Tim, or the Bill Murray spoof Tiny Tim in the Christman Caroll? Because that Tiny Tim had an AK and kicked some ass and took names...
The savings rate will shoot much higher if we let foreclosures run their course. There is no better way to increase savings then to get Americans out of their $2,500 a month mortgage and into a $1,500 rental apartment.
I fear however that our Congress critters that have pushed "homeownership" for decades are going to do everything they can to keep the ignorant paying that $2,500 a month mortgage when they could walk away and be better off.
I'm hoping those crooks drive it to $40. I'll buy more. And i started buying in at $120 and have bought all the way down. I'm down $50,000 so far. they amuse me. I can remain irrational longer than they can remain solvent.
shop til you drop.
12th Percentile
You're my new role model(except the down $50g's part)
How much real saving is going on vs defaults and BK?
"U.S. consumers are falling deeper into debt, an official at one of the largest U.S. credit bureaus told Reuters on Tuesday, as the U.S. recession deepens and job losses mount. Dann Adams, president of U.S. Information Systems for Equifax Inc, said the already high rate of personal bankruptcies could increase. "We've seen a continued ramp up of delinquencies across the board," he said. That would pile more bad debt on banks already struggling to cope with heavy mortgage-related losses. Consumers are missing payments on mortgages, credit cards, and auto loans, Adams said, adding that Americans may be growing more reluctant to take on new debt and more willing to save."
I've watched CNBC a bit lately. Kudlow seems to always have the most pedestrian observations that are tainted with a simpleton's idealism. Yet, people like Marc Faber, Joe Kiernen and many guests, who actually are smart, treat him with such deference. Why is that? Was he at some point a respected commentator? Does he have strong political connections or ownership in GE?
Anonymous writes:
I've never understood the visceral hatred that American conservatives have for Jimmy Carter. I mean isn't fiscal responsibility, saving, frugality the bedrock of conservatism?
I can haz bailouts | 12.24.08 - 12:34 pm | #-------------------------------
sdtfs writes:
Don't forget that merchant would likely have to give up 3 to 6 percent to the CC companies for the privilege of taking their cards, not worth it.
Profit margin on coffee is north of 50%, so actually was worth it
I think the other thing this shows is that people are way off when they're comparing our situation to the lost decade of Japan's crisis. The savings rate trends are some of the best indicators that we're not Japan ... yet. Also, this is a good predictor of what consumers will do with stimulus money - it won't do much to stimulate even if they do just put it into banks. An increased in deposits won't create more lending comfort for large creditors.
reptillian writes:
Hmmm. What happened about '84? Looks like there has been a downtrend in the savings rate since then. I won't say its Reagonomics until I know so. Another Ben, Ben Franklin, said, "Neither a borrower nor a lender be."
The 1981-82 Reagan recession was the worst since the 1930s and almost destroyed the economy and his presidency. I called Fed Chairman Paul Volcker, on St. Patricks Day 1982 as I recall, practically begging him to ease monetary policy by buying bonds with newly created dollar liquidity. Gold was at $310. You want me to inflate? he asked incredulously. No, I just want you to stop the deflation, or all the dollar debtors in the world will go bankrupt.
The deflation ended by accident in the week of August 11, 1982, when Volcker was faced with a crisis in Mexico, which could not pay interest on its $80 billion in debt to U.S. banks. He had to tell the Reagan Treasury he could no longer worry about the money supply because he had to monetize $4 billion in Mexican peso bonds. The price of gold rose $56 that week and the financial markets skyrocketedbonds, stocks, the S&P 500, with Nasdaq out front. Monetary policy had been twinned with tax policy, both going in the same direction. The Reagan boom had begun.
"I don't have cash all the time. Instead of getting charged a fee at an ATM, I'll gladly charge $1.50 at 7-11. Elvis | 12.24.08 - 1:13 pm | # "
Besides, that's 1.5 miles towards my next airline trip or upgrade. xxxxx | 12.24.08 - 1:17 pm | #
I run everything through Amex. I pay it off every month and enjoy a healthy check at the end of each year. Besides, why would I want to pay for a transaction fee I didn't use by paying with cash? You really think the merchant pays those credit card fees?
"Let me say from personal experience. Cut out the sucking up and stupid jokes (CR humor is really bad) when dealing with INS. It really doesn't work."
Can I have that in everday English ? I'm a simple soul from a simple background and I have no need of a green card. Does that make me persona non grata ?
I'm not sure what the "true" savings rate is, but I would argue long and hard that the statistic calculated as savings rate by the BEA is NOT it.
There's a very strong argument for excluding unrealized capital gains, as the BEA does, and that's fine. The BEA also excludes realized capital gains, and while that's an arguable point, you can give them the benefit of the doubt. HOWEVER. When the BEA goes on to subtract the capital gains taxes paid on realized capital gains without including the aftertax value of realized capital gains in the savings rate, they've clearly missed something important.
In a way, it's nice to know that CR is human and misbelieves in something (that seems badly flawed, like the BEA savings rate) just like the rest of us do, although a lot more frequently.
This URL is a pretty good discussion of the issues, from the BEA website:
I was surprised to see that just adding back consumer durables purchases to the savings rate (chart Two in the PDF file above) gains about 3 percentage points of absolute savings in 2000, and picks up about 2 percentage points of savings relative to the rate in the early 1980s (when durable goods purchases were proportionally less of income).
Someone wrote above that if savings paid 18% today as they did around 1980 we'd probably see a higher savings rate. But as the graph shows, that didn't raise the savings rate.
That somewhat counter-intuitive phenomenon did not go unnoticed. Apparently people believed that with interest rates so high they wouldn't need to save as much -- they never foresaw that rates might have dropped to zero by the time they retired.
jm, if you'd bothered to open the .pdf file, which is an excellent report on components of savings, you'd have seen that just looking at "Chart Two" clearly shows that the gap between the official reported BEA savings rate and the unofficial durables added back in savings rate was about 1% in the early 1980s and about 3% in 2000.
Now. I don't have a Phd in economics, but I do have an MBA from the Wharton School of Finance, and I know for d*mn sure that we were taught that while macroeconomists ignore the "savings component" of consumer durables purchases that it is a partial fiction to do so - because when you buy a golf ball it's unlikely to last you more than a day on the links, but when you buy a new car or a new washing machine that's likely to last more than a year charging the entire purchase to "consumption" in the year bought is wrong.
In fact, to push the fiction a bit further, some washing machines ARE capitalized in the year of purchase and properly depreciated in the gov't accounts and some are expensed 100% in the year of purchase! What determines the difference? Well, when a laundromat business buys a new washing machine, GAAP accounting requires it to capitalize the purchase and then depreciate the thing over its useful life - but the same machine bought by a consumer has to be expensed (for BEA accounting purposes) 100% in the year bought.
Look at the savings rate graph...it's not a surprise that it correlates very well with the systematic export of US jobs to 3rd world countries. Take money out of the economy and less will be saved. It's simple economics.
The spike is due to millions of people saving money during and after foreclosure. Millions are also paying down unsecured debt. It's an excellent sign, and I hope that it continues.
Hopefully, the retail sector will learn that the middle-men-import-99%-of-product business model is not sustainable.
I have a bit of a dumb question. Looking at the graph, it looks like there was a secular trend shift away from saving money around 1983-1984 (aka just before I entered kindergarten). I do know that savings were a bigger deal in the 70s and whatnot. Anyone has a good idea why the secular trend changed? I know it's been covered somewhere. I'd just like to know where.
People generally save more when they feel a greater need to put money aside for the future. When the future looks more finacially secure they save less.
Stock market profits were easy during the 1990s, as were real estate profits until recently. People thought their easy gains on stocks, and then real estate would be their savings.
The savings rate declined as people became less concerned about risk. They are becoming more concerned now.
Anon: The great bull market in stocks took wing in 1982, and along with that long-term interest rates collapsed from 11%-12%.
Important to note that if everyone has their money in high interest coupon bonds, that income generates "savings", while if everyone has their money in stocks generating (admittedly ephemeral capital gains) positive returns that counts as "nothing" except the dividend yield component.
It is also true that the official measure of the savings rate is a bogus number. It does not measure savings - it is an incomplete derivative calculation.
Realized and taxed capital gains on stock during the 1990s, and real estate gains a few years ago reduce the measured savings rate. As we have less profit from our investments the measured "savings rate" will decline - even if we are actually saving more of our income.
But I do think that Americans did go on a buying binge that accelerated over the last 20 years.
This was partially enabled by credit, and motivated by low prices. The wealth effect (rising stock prices and then their real estate) gave them the confidence to save less and spend more.
"Family net wealth, the nations true savings rate, advanced 8 percent in 2005 to a record level of $52 trillion"
Just illustrates how clueless and blinded by their own knowledge of the details and minutae of these so called financial experts were. Yeah...blow up credit...use that credit to bid up asset prices...and we are all rich!
Proven moron. If he did not get it then...he likely still does not get it.
It's no coincidence the savings rate was the lowest, and even negative, during the last bubble.
Net worth as an aggregate means nothing in a bubble. You might as well keep track of everyone's salary in terms of barrels of oil. Has everybody's salary tripled in the last 12 months simply because they can buy 3 times as much oil with that money? Of course not.
Zephyr wrote: Realized investment gains perversely reduce the savings rate. Unrealized investment gains are not counted.
As people now sell and realize capital losses, those losses will perversly increase the official savings rate.
But that is not so. As one can find in the pdf referenced by Anarchus:
Because national income is defined as originating from current production of goods and services, it excludes capital gains. Capital gains originate from revaluations of existing assets rather than from production of new goods and services. Besides insuring the conceptual consistency of the NIPAs, the treatment of capital gains as separate from national income has three noteworthy advantages.
First, with capital gains excluded from income, national saving becomes conceptually equal to domestic investment plus net foreign investment ...
Even more importantly, a capital gain can be realized only by the sale of the capital asset in question, and the income from that sale comprises a transfer to the seller from the buyer. So the gain has no associated investment component except to the extent that it reflects a genuine increase in the value of the sold asset as productive capital. Since that value exists even if the asset is not sold and the rate at which such gains are realized is unsteady, and the fraction of tradeable asset price increases that represents genuine value increase (as distinct from speculation) is also unsteady, there is really no practical way to quantify it as a component of savings, and it is better just to assume that it does not fluctuate so greatly as to invalidate the information provided by the components that can practically be quantified.
Moreover, and most importantly, the savings rate measure used by the BEA quantifies what fraction of current income-generating activity is directed to ends other than current consumption (with a small error* to the extent that some fraction of durable goods consumption has the nature of saving).
*Largely irrelevant to interpretation of the graph presented by CR, as it is small relative to the 16-year descent of the savings rate from 12% to 0%.
Anonymous writes:
As the chart shows, our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%. History will vindicate Jimmy as sure as it will eviscerate Bush.
Anonymous | 12.24.08 - 12:22 pm | #
ROLMAO! You are an idiot. Recently, your beloved Carter has been lamenting for Hezbollah because they don't have enough weapons to defend against Israel. One thing is for sure, Carter defends Islam, the religion of pure hate. Add up the achievements of Israel against the entire Muslim world- hands down, Israel has benefited mankind orders of magnitude more than all Muslim nations combined. May you not have a Merry Christmas you Jew hater.
jm, I agree that counting capital gains is problematic. But you missed the point. The measure of savings includes a reduction for taxes paid on capital gains while ignoring the benefit of the gain itself. Good accounting would either include or exclude both aspects of the transaction.
And peoples' perception of their gains (valid or not) is very relevant to their spending habits. The wealth effect is very real.
The observed decline in saving mostly reflects actual decline in savings as people did spend more (the wealth effect, cheap import prices, easy credit). But part of the observed decline is from the errors related to growth of income taxes on capital gains.
fi
savings rate bottom?
Mustard seeds, people! Mustard seeds! And a couple of lines of coke.
"The latest chant is that ... a day of reckoning marked by a housing-price crash and an overwhelming debt burden is headed our way. This is utter nonsense."
LMAO!
Sir Goldilocks got something wrong? What a shock. The man is wrong all the time and incredibly still has a job......
CNBC is pathetic.
might be interested in seeing a bit more history(c1900)
Yeah,
The "but you're excluding housing & stocks" meme was another one of the great rationalizations of the bubble years.
CR, perhaps during the holidays (on a slow news day) you could do a post on those (e.g., "Housing always goes up") and then everyone could contribute in the comments. I'm sure we could put together quite the collection, and get a good laugh at the same time.
CR, no fair picking on Larry Kudlow.
All we minions here could do that.
Favorie Dumblow recommendation is to buy housing stocks at their peak in the summer of 2005...what an idiot!
Savings rate is just income minus expenditures, not necessarily what people put into savings accounts or whatever. The perversity of ZIRP is such that even with high savings rates, people will lose incentives to keep money in banks, and thus the high savings rate does nothing productive for the economy.
OT-
"Manager of failed money market fund says SEC to charge company with securities laws violations
NEW YORK (AP) -- Reserve Management Co., which is facing a slew of investor lawsuits after its money market fund fell below a key safety benchmark, said late Tuesday the Securities and Exchange Commission plans to charge the company and its management with violations of securities laws."
At last!
CR, ever the gentleman, and allowing the good "Mr" K to hoist himself on his own petard.
Even my Mother in Law is saying that it may not be a good time to buy a house now....is that a bottoming indicator for the UK...I hope not
Larry Kudlow on National Review Online
Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.
reminds me of when they remove the breathing tube
Now that Americans are starting to save again, you can almost be sure deflation is coming.
None of this has happened. The Federal Reserve has effectively mopped up excess cash and calmed inflation expectations. Thats why bond rates are hovering around 4 percent, with most mortgage rates about a point higher.
Meanwhile, the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they havent done their homework. If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments havent changed much during the past three and a half decades.
picking on the idiot kudlow?
that's like beating up on a five year old
It's a great time to spend or save money !
*above is Kudlow from 2005
As they watched house porn on SKY today they said the Outlaws will need to now redo these programs as the prices are all wrong.
I said they won't be able to as the people presentnig will all be in jail or labour camps in 5 years....no one laughed and I got one of those looks from my beautiful wife.
however last night when I said I had no debt and quite a bit of savings i was told , yes but you don't own a house...i said yes I knew there was another good thing I'd forgotten....you could have heard the equity drop on the family home in the silence that followed
I love Christmas, don't you....
dear fellow americans
while you are at the malls, i'm sipping your milkshakes. I'd be drinking them but unfortunately there isn't much there.
cue sound of straw sucking at the bottom of gelatinious Mcdonald's frozen milky drinky thing of choice. Or, if still at the malls, sound of last remnants of Orange Julius.
If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments haven't changed much during the past three and a half decades. ~LK
crispy&cole | Homepage | 12.24.08 - 12:03 pm | #
A little elbo grease.... LOL!!!!!
Looks like CR found some mustard seeds...at least purchasing power goes to zero when you lose your job
Hmmm. What happened about '84? Looks like there has been a downtrend in the savings rate since then. I won't say its Reagonomics until I know so. Another Ben, Ben Franklin, said, "Neither a borrower nor a lender be."
Kudlow is a fool.
Picking on goldiflops?
Classic link still works!
"Meanwhile, the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they havent done their homework. If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments havent changed much during the past three and a half decades"
The Housing Bears Are Wrong Again
kuddley Kudlow, always good for a laugh
monta's ankle writes:
picking on the idiot kudlow?
that's like beating up on a five year old
monta's ankle | 12.24.08 - 12:04 pm | #
MA, you owe an apology to every 5-year old.
The only reason Kudhigh hasn't lost his job is that he is the biggest cheerleader on that channel.
Okay, maybe Dennis Kneale is, but either way, LK is one of the top 2.
He is has never seen a "bad" news story that he couldn't spin into good news for the market.
Makes me want to puke.
Yeah, keep spending, keep the eCONomy moving ahead at an unsustainable rate. You'll never have to pay it back.
What a jerk!
SEC Cox
Cox said the biggest mistake of his tenure was agreeing in September to an extraordinary three-week ban on short selling of financial company stocks. But in publicly acknowledging for the first time that this ban was not productive, Cox said he had been under intense pressure from Treasury Secretary Henry M. Paulson Jr. and Fed Chairman Ben S. Bernanke to take this action and did so reluctantly. They "were of the view that if we did not act and act at that instant, these financial institutions could fail as a result and there would be nothing left to save," Cox said.
Since I was short financials does this mean I get my money back????
*above is Kudlow from 2005
crispy&cole | Homepage | 12.24.08 - 12:04 pm | #
Amazing how much ink was spilled detailing these elaborate arguments about why there wasn't a bubble. The quasi mea culpa from Lereah was excellent.
One sign of capitulation: when these guys are ignored completely.
jamie -
You're killing me. This is exactly the trail of conversation I'll be trying to stop myself from going down tomorrow at the family get together. And my wife will be ready with "the look" if I can't stop myself....
Too funny!
CJ
...you could have heard the equity drop on the family home in the silence that followed
I love Christmas, don't you....
jamie
God on ya Jamie. Now get pissfaced drunk at dinner, insult all at the table, puke on your plate, then pass out face first into your puke filled plate. This will assure you peaceful holidays for years to come.
crispy&cole writes:
http:// article.nationalreview.co...mYzNTY3NDNiODA=
Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.
crispy&cole | Homepage | 12.24.08 - 12:03 pm | #
C&C, what world does this guy live in?
What world does that entire channel live in?
I know they all see the numbers and the numbers don't lie.
I get that they make zillions working for the TV, but come on! How do you get up every day, esp. the early ones like Erin B. and look yourself in the mirror, knowing that today I have to come up with yet some sh!t to spin because the eCONomy is so bad?
Again, I know we all have a price, but at what point do you save enough of that easy TV money and then say goodbye?
Look, even Liar Liar of NAR fame has finally started to show signs of cracking after getting off that ship.
Help me understand this thought process.
U.S. savings rate as a percent of disposable personal income.
Rather than more savings the rise could equally represent the same savings and less disposable personal income.
In the tough recessions of '74 and '82, the rate rose to 12%.
In the depression we are now entering it will rise even higher. Boomers facing imminent (and perhaps forced) retirement with wealth depleted by stock and real estate collapses, and interest rates kept at zero by financial system bailout, are going to realize they must save at very high rates to avoid future poverty.
PCE will plummet, and much of the vast network of warehouses and stores built to distribute the goods formerly bought on credit will go vacant. And the people who used to work in them will need to find other ways to make a living.
Think Timmy got Xmas eve off?
jamie writes:
however last night when I said I had no debt and quite a bit of savings i was told , yes but you don't own a house...i said yes I knew there was another good thing I'd forgotten....you could have heard the equity drop on the family home in the silence that followed
I love Christmas, don't you....
jamie | 12.24.08 - 12:07 pm | #
Jamie, you cruel SOB. But I def. like your style.
How telling is it when everyone shuts up. They know you made the right moves and they have no response because they are pissed that can't drag you down with them.
They hate that you have no debt, a an actual savings account, and don't have to worry about a new water heater or tranny for the car because you don't have to pay some slime ball at Doublewide every month to "borro" a home.
you could have heard the equity drop on the family home in the silence that followed
I love Christmas, don't you....
\t jamie | \t \t \t \t12.24.08 - 12:07 pm | #
A road I've been down myself. FWIW, I'd rather have a peaceful holiday than win the arguement. I did put up with my share of bullshit during the bubble years for not buying, but my family won't touch the subject with me anymore. They're too smart to bring it up, and I'm to smart to rub it in.
As the chart shows, our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%. History will vindicate Jimmy as sure as it will eviscerate Bush.
OCDan and Max - I missed the David Liar mea culpa...any link?
This is good news for GDP growth
Feliz Navidad All!
YouTube -
What is this word savings? Is this like not spending? Another term I know not. I've never heard such frightening words.
I just want back the peace that maxing out my HELOC and CC brings. It makes me all warm and fuzzy. This other stuff is too hard.
I'm gonna go an $8.00 latte on my Amex and think about this. Hope my brain doesn't explode.
Nostrovia,
Health care expenses are in large part a result of our own cause. Smoking, sitting and eating and watching TV. Overweight American citizens. Worshiping money with stress syndrome. I once went for a regular check up at Kaiser in LA and Dr. Said that STD health care issures kept her in business. She also said that on Item alone was a major part of her client's issues on health. Cause and effect.
Kudow writes:
The focus of the Committees policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserves balance sheet at a high level. (Italics mine.)
The Fed goes on to say it will purchase large quantities of agency debt meaning Fannie and Freddie and more mortgage-backed securities (quite possibly toxic assets). In other words, it wants to drive mortgage rates down. Whats more, the Fed may buy long-term Treasury securities, also to drive bond yields lower. And it will purchase the Term Asset Backed Securities Loan Facility in order to finance consumer-related bonds and pump liquidity to consumer lenders.
The message here is that Bernanke & Co. is locked and loaded, ready to shoot every last bullet to help credit markets and the economy. In particular, the Fed is formally adopting a Milton Friedman-type approach that is directed at expanding its balance sheet and stimulating the economy.
The Feds balance sheet already has more than doubled from roughly $900 billion to $2.2 trillion. For all we know it may soon double again. Money-supply measures are already growing at 7 to 8 percent.
And while some economists worry about higher future inflation from all this money-creation, Tuesdays consumer price report actually showed deflation of 10 percent annually over the past three months. That gives the central bank ammunition to ignore inflation and aim instead for a massive monetary easing.
Will it all work? In the short-run it may. But is a near-zero interest rate, and even more pump-priming, really the best longer-term solution? Its still troubling that Fed policy lacks a true anchor or compass. In the past, targeting the economy alone has resulted in higher inflation. Thats why many conservatives wish the central bank would keep a sharp eye on the value of the dollar and commodity prices (including gold).
While energy and other commodity prices have experienced a wicked plunge since the summer, in recent days ahead of the Feds new policy decision the dollar has fallen and commodities have rebounded. But the question is this: In the future, will the Fed be able to unwind its huge cash-liquidity injections? The same can be asked about government bailouts for banks and quite possibly Detroit. Yes, this is an emergency. But its also unprecedented government intervention in the economy. How we restore traditional free-market capitalism remains unsaid and unknown. That is worrisome.
Stocks cheered the Feds move by rallying nearly 400 points on Tuesday. Savvy investors Ken Heebner and Robert Doll two financial and political conservatives strongly endorsed the Fed moves on CNBC. This massive easing almost certainly underscores the likelihood that stocks bottomed on November 20. Both the monetary surge and the upturn in equities are pointing to economic recovery next spring or summer.
Meanwhile, on the fiscal policy front, everyone has been focusing on Obamas huge big-government-spending infrastructure play. But Team Obama is also drawing up plans for a massive purchase of mortgages in order to get long-term borrowing rates down to 4.5 percent a full percentage-point drop. The specifics are sketchy, but theres no question the Obama Treasury, led by Tim Geithner, will be working hand-in-glove with Geithners former Fed boss Ben Bernanke to drive down mortgage rates and stop the housing slump.
Perhaps Bernanke himself scored a few points with his historic shock-and-awe easing move. Its as though Bernanke is telling the new president: Hey, Im on your team.
But I still believe the best economic stimulus would be a move to cut tax rates across-the-board for individuals and businesses. No matter how much money the Fed prints, or how many roads or mortgages Uncle Sam buys, none of it creates new incentives for private enterprise, risk-taking, and investment.
By focusing on net wealth (inflated by the housing bubble and excessive stock prices), Mr. Kudlow completely missed the biggest story of our time.
This "missing of the story" is completely intentional, of course.
I assume CR did not spell out this because it is completely and totally obvious, but I've learned not to assume clarity among my fellow Americans: it might be better to explicitly explain that teevee has become a mouthpiece for Con propaganda, because there are a few out there who haven't caught on.
crispy&cole writes:
OCDan and Max - I missed the David Liar mea culpa...any link?
crispy&cole | Homepage | 12.24.08 - 12:24 pm | #
C&C, here ya go for Diarrea (sp?, I know):
Another Reason Not to Trust So-Called Economic Experts -- Seeking Alpha
Former real estate bull admits, I spun
Working for realtors, David Lereah was famously optimistic. Not anymore.
By Donna Rosato
As chief economist for the National Association of Realtors, David Lereah was famously optimistic. Now a private consultant, hes abandoned what he calls the positive spin.
Q: Were you wrong to be so bullish?
A: I worked for an association promoting housing, and it was my job to represent their interests. If you look at my actual forecasts, the numbers were right inline with most forecasts. The difference was that I put a positive spin on it It was easy to do during boom times, harder when times werent good. I never thought the whole national real estate market would burst.
Q: The NARs latest forecast calls for a slight increase in home prices next year. Thoughts?
A: My views are quite different now. Im pretty bearish and have been for the past year and a half. Home prices will continue to drop. I think well see a very modest recovery in sales activity in 2009. But weve still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. Itll take a long time to get back to the peak prices we saw in many markets.
Q: Any regrets?
A: I would not have done anything different. But I was a public spokesman writing about housing having a good future. I was wrong. I have to take responsibility for that.
thanks!!
...will all be in jail or labour camps in 5 years...
Hey, aren't those NEWlabour camps? (ducks, runs away)
I'm gonna go an $8.00 latte on my Amex and think about this. Hope my brain doesn't explode.
Nostrovia,
Comrade Misean is Dope
I was in a Dunkin Donuts last week. The guy in front of me pulled out his Amex to pay for a cup of coffee and 2 donuts, $3. The guy behind the counter wouldn't take it. The dude didn't have the $3 and after hollering at the guy stormed out w/o his coffee and donuts
Comrade Misean is Dope writes:
What is this word savings? Is this like not spending? Another term I know not. I've never heard such frightening words.
I just want back the peace that maxing out my HELOC and CC brings. It makes me all warm and fuzzy. This other stuff is too hard.
I'm gonna go an $8.00 latte on my Amex and think about this. Hope my brain doesn't explode.
Nostrovia,
Comrade Misean is Dope | 12.24.08 - 12:25 pm | #
ROTFLMAO!
That is some funny stuff for 9:23 AM PST on Christmas Eve.
Very nice!
Sadly, I wonder how many in this country wish this were still true?
Lereah can't even accept blame cleanly. I wonder when he'll remove his book from publication?
I'm gonna go an $8.00 latte on my Amex and think about this. Hope my brain doesn't explode.
Hey, don't knock it. I get 3% cash back on restaurant purchases. Nice little end of the year bonus when you travel as much as I do.
"Hey, don't knock it. I get 3% cash back on restaurant purchases. Nice little end of the year bonus when you travel as much as I do."
Is 3% back on McD's really worth the hassle?
I was in a Dunkin Donuts last week. The guy in front of me pulled out his Amex to pay for a cup of coffee and 2 donuts, $3. The guy behind the counter wouldn't take it. The dude didn't have the $3 and after hollering at the guy stormed out w/o his coffee and donuts
Anonymous | 12.24.08 - 12:29 pm | #
Before some get all snotty about rewards, let me just say that if you are that deperate to charge 3 bucks to get back 10 cents in rewards you are as bad as the person who wastes 2 bucks on gas to save 25 cents on toilet paper in the town next door.
CRIKEY! JUST PAY FOR YOUR DONUTS AND COFFEE W/CASH!
I am serious. This is pathetic.
AND DON'T GIVE THE CASH CRAP, EITHER.
We are not totally cashless yet and remember, esp. with AMEX that store owner will wait to get his money from them (BUFFET)!
3 freggin' bucks. Cash only buddy!
I've never understood the visceral hatred that American conservatives have for Jimmy Carter. I mean isn't fiscal responsibility, saving, frugality the bedrock of conservatism?
Hey, don't knock it. I get 3% cash back on restaurant purchases. Nice little end of the year bonus when you travel as much as I do.
Max | Homepage | 12.24.08 - 12:32 pm | #
Okay, restaurant. I get 3% back on $100 meals.
This was freggin Dunkin' Donuts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1
No matter what people in power do, home prices will drop until they are affordable with a down payment and proof of payment.
Cars will sell to the public as the public demands. That is wonderful. Now the SUV demand is up again. Low gas prices. This free society is a wonderful place. Also the TV and internet is shouting from the housetops all about the private affairs of everyone. That is wonderful. No one can hide forever. The free press is wonderful.
You calculated risk are too too negative. You have Good show of information of course.
USA is the greatist country in the world and all should be greatful who live in the USA. Interesting all nations want to get into the USA. Hmm......
Pissed off in California writes:
"Hey, don't knock it. I get 3% cash back on restaurant purchases. Nice little end of the year bonus when you travel as much as I do."
Is 3% back on McD's really worth the hassle?
Pissed off in California | 12.24.08 - 12:33 pm | #
Are you saying that he considers Mickey D's fine dining?
OUCH!
41Cadillac
Perhaps you are being ironic, but if not, it should read
"U.S. and A."
I can haz bailouts writes:
I've never understood the visceral hatred that American conservatives have for Jimmy Carter. I mean isn't fiscal responsibility, saving, frugality the bedrock of conservatism?
I can haz bailouts | 12.24.08 - 12:34 pm | #
That is in an alternate universe without NeoCON men!
Yeah, that RR was some conservative. What 2 trillion national debt by the time he was done?
Pay the man!
I read an article in fortune a while back on Leon Levy, a very successful investor. It contained this quote that really stopped me in my tracks:
"By Levy's calculation, "each 1% rise in savings will cut profits by 11%.
Here's the article:
Soros Vs. Levy Vs. Buffett - Forbes.com
Oh, look...it's the bottom:
Home prices may rise on mortgage refinancing boom
| Reuters
(Reuters) - Veteran banking analyst Richard Bove said he expects housing prices in the United States to stabilize and/or rise after a likely boom in mortgage refinance, as mortgage rates fall and loan applications increase.
"It is quite likely that the country is about to enter a new mortgage refinance boom," the Ladenburg Thalmann analyst wrote in a note to clients.
"The Treasury and the Federal Reserve have created an environment which makes this development almost impossible to avoid," Bove said.
Hey, a couple of years ago on the holidays, I persuaded my Brother in law NOT to buy in investment property. He was all "What's the WORST that can happen? The bank takes the house back." I then pointed out that we live in a recourse state, so that after the sell it they can come after you for the REST of their money.
USA is the greatist country in the world and all should be greatful who live in the USA. Interesting all nations want to get into the USA. Hmm......
41Cadillac
Worst spellers though
"Veteran banking analyst Richard Bove"
LOL!!
He said to buy banks a year ago...he also said LEH and BSC were great investments..
Misean is back? Where'd you go bro? (I havent been posting at nights so maybe you've been back for a while)
jamie - ROTFLOL!!!!!
.........
" Anonymous writes:
As the chart shows, our last honest president [sic], the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%.....
Anonymous | 12.24.08 - 12:22 pm | # "
If we had a savings vehicle that paid 18% today, as they did around 1980, we'd probably see a higher savings rate now. At this point it "literally" doesn't pay to save
Are you saying that he considers Mickey D's fine dining?
In this recession any dining is fine dining.
41Cadillac - what are you saying? (in english please)
"If we had a savings vehicle that paid 18% today, as they did around 1980, we'd probably see a higher savings rate now. At this point it "literally" doesn't pay to save ;-)"
Well it does if you getting -20% on all your other investment options.
If we had a savings vehicle that paid 18% today, as they did around 1980, we'd probably see a higher savings rate now. At this point it "literally" doesn't pay to save
xxxxx
It was higher during the Reagan years, Hump.
I can haz- What I find interesting about Carter Hatred is the fact the he was probably one the two most avowedly Christian presidents in modern times. Yet he is regarded as some sort of Antichrist by the evagelicals who put W in office.
Agree on Carter as an underrated President...the funny thing about CONservatives is how they claim interest rates and the recession occured during Caters term...the peak in rates was in 1982 and the recession dates are during RR's term...historical revionists are what make CONservatives so hated by me.
[our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate]
LMAO. I only hope Obama isn't nearly as honest, or we're in for quite a depression.
It's all about keeping up appearances..
" Pissed off in California writes:
"If we had a savings vehicle that paid 18% today, as they did around 1980, we'd probably see a higher savings rate now. At this point it "literally" doesn't pay to save ;-)"
Well it does if you getting -20% on all your other investment options.
Pissed off in California | 12.24.08 - 12:40 pm | # "
For that matter, if the currency is deflating, there is a "real" return on 0% interest. However, the number in your account doesn't get bigger, which was my point, and there was a smiley face afterward.
" Jim A. writes:
I can haz- What I find interesting about Carter Hatred is the fact the he was probably one the two most avowedly Christian presidents in modern times. Yet he is regarded as some sort of Antichrist by the evagelicals who put W in office.
Jim A. | 12.24.08 - 12:40 pm | # "
Must'a been the lust in his heart
Max,
"Lereah can't even accept blame cleanly."
Roll in the mire long enough and the worms get into your brain...or so I've heard.
Nostrovia,
Hey Misean do you ever speak with CSC? He's another that went missing.
ades,
Yesterday. Posted last night.
Nostrovia,
" bearly writes:
[our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate]
LMAO. I only hope Obama isn't nearly as honest, or we're in for quite a depression.....
bearly | 12.24.08 - 12:43 pm | # "
Don't worry about the honesty part, but that doesn't guarantee that we won't get quite a depression.
Roll in the mire long enough and the worms get into your brain...or so I've heard.
Comrade Misean is Dope | 12.24.08 - 12:45 pm | #
True, true. Waiting for a true admission from these guys is like waiting for Godot. You'll never know what's in their heart of hearts, but for those who crave the spotlight, being forced into the shadows is punishment enough. At least his Momma still loves him.
Another Ben, Ben Franklin, said, "Neither a borrower nor a lender be." That was Polonius, part of a speech establishing him as a stupid old fart.
Finally Americans are beginning to save. Bravo! I bet it won't last.
Scary chart. If we get to 6% in the next six months and stays there...yikes, they'll need more than a trillion to stimulate the e con no me.
Cheers! Good to hear from you. I'll enjoy your macro theories as it gets hairier (sp?) around these parts!
I love Christmas, don't you....
jamie | 12.24.08 - 12:07 pm | #
While that anecdote is hilarious (thank you) I hope it is also fiction or hyperbole.
Not good karma to defecate under the Christmas tree.
OT,
Perhaps the more interesting flaming brown bag of crap that Obama will find buring on his door step is a rapidly deteriorating semi-failed Russian state about to invade/shake-down the rest of its neighbors for cold, hard cash. next Ukrain:
Gazprom Threatens to Cut Gas Deliveries to Ukraine (Update1) - Bloomberg.com
I think people are saving rice more than money now.
The question is not whether people are saving. I find that false. but whether people are paying down debt. Probably what we're seeing in the household wealth equation. Debt is lowered, but savings not necessarily there...
But I agree with Elvis, if they are not already doing so, lock in those prices today for rice, flour, corn-meal, dried fruit & nuts.
CR,
Based on what I've witnessed in about half a dozen locations around the US, I will hazard a guess that this bump up in savings will prove to be temporary. For a couple of months, during the continuous drops in the stock markets in October and November, I noticed drastic reductions in retail consumption. By the end of December, the shock seemed to have worn off and people seemed to be consuming to their capacity again.
Medvedev "How much for your wife? How much for your little girl? How much for all your women?"
The savings rate is probably headed up. But one reason to not expect it to be lower than historical levels in the 1970s is how pensions are handled.
People who receive pensions are running down pension fund assets. The money they get is therefore not considered income to the household sector. Therefore, all spending by pensioners is treated as dissaving and subtracts from the savings made by other households.
Given the changed demographics of society, this is one reason that the savings rate will be lower than in previous eras.
It looks like savings from lower gasoline prices is showing up as savings - as opposed to other consumption - and this process of increasing savings is a necessary step towards restoring healthy household balance sheets. -CR
Interesting charts as usual. Got one question though... You see the big lurch in savings, beginning with the Q2 at the same time that gas prices were going stratospheric. It would seem that would be attributable to something other than fuel savings. Stimulus checks? That's my bet. The next little lurch by Q3 says paranoia.
Medvedev is simply repeating the lines from the star of the show, Mr. Putin as a good understudy must do. I fear however, in Russia, understudy also means lampost decoration.
Time to borrow and spend
As the chart shows, our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%. History will vindicate Jimmy as sure as it will eviscerate Bush.
Anonymous | 12.24.08 - 12:22 pm | #
Bwahahaha! Nice.
In Russia, sanction means conquest.
This 1 year chart sums it up:
^N225: Basic Chart for NIKKEI 225 - Yahoo! Finance
I just bought another chunk of SRS at $57. Merry christmas. No need to post your "double shorts sux" bits. I understand all that. I"m just trying to take Popeye's money.
peace on earth, etc
Warning Naive Question Ahead:
So if savings rates go up. It will recapitalize the banks and maybe they start lending again. But it might do nothing for the equity markets right? That would be investment right? What about buying bonds? Investment?
TIA!
In Chimerica, "Ruble" means toilet paper.
12th-I'm hoping friday stays flat for my next buy in...
Merry Christmas to all..
Thanks CR for the best information on what's really going on..
Peace...
Jimmy Carter the individual vindicated Jimmy Carter the President ... not the other way around.
Anonymous writes:
As the chart shows, our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%. History will vindicate Jimmy as sure as it will eviscerate Bush.
Anonymous | 12.24.08 - 12:22 pm | #
The cost of inflated food prices will destroy savings and add to deflation!
[blackhat writes:
The question is not whether people are saving]
I agree. I think BKs & defaults are destroying revolving debt faster than it's accumulating. It's just more evidence of the violent convulsions of a cratering economy evident in equities & bonds.
I've never understood the visceral hatred that American conservatives have for Jimmy Carter. I mean isn't fiscal responsibility, saving, frugality the bedrock of conservatism?
I can haz bailouts | 12.24.08 - 12:34 pm | #
Problem is that he "walked the walk" and paid the price; Pseudo-Conservatives just "talk to talk", then skip out just before the bill comes due leaving the rest of us to cover the tab. Please refer to the discussion of truth, lies, and bullshit from several threads ago. The Pseudo-Conservatives are just worthless bullshit artists. Terrified that everyone will realize how worthless they are and ignore them.
And Kudlow still has an on air presence on CNBC. What a bunch of jokers.
I was in a Dunkin Donuts last week. The guy in front of me pulled out his Amex to pay for a cup of coffee and 2 donuts, $3. The guy behind the counter wouldn't take it. The dude didn't have the $3 and after hollering at the guy stormed out w/o his coffee and donuts
Anonymous | 12.24.08 - 12:29 pm | #
Don't forget that merchant would likely have to give up 3 to 6 percent to the CC companies for the privilege of taking their cards, not worth it. At 4 dollars for gas, the stations realized they were getting shafted by the fees, too.
ades writes:
"So if savings rates go up. It will recapitalize the banks and maybe they start lending again. But it might do nothing for the equity markets right? That would be investment right? What about buying bonds? Investment?"
The savings will re-liquify the banks, not necessarily re-capitalize them. (Re-capitalization implies that equity goes up. If deposits go up, all that means is that the bank is more liquid.)
The household sector tends to "save" little in equities. Why - for every buyer, there is a seller. So when person A buys some equity from person B, there is no net purchasing of equity by the household sector.
The only way for the household sector to save in equities is for the corporate sector to issue them new equity (or sell whatever equities they hold). In recent years, the flow was the other way - the corporate sector was (stupidly) a net buyer of equities from households.
Denninger redeemed himself this morning with an excellent analysis of why the current stimulus plan (Keynes) will either fall flat or merely postpone the inevitable collapse of the economy.
12th Percentile writes:
I just bought another chunk of SRS at $57
I tore off another chunk at $57.02. I should of waited for next week. It will be lower, DOW up until New years. I'll tear off another chunk then.
There he goes again: "were going to need every possible voice to counter the niggling nabobs of negativism."
Keynes’s difficult idea - Paul Krugman Blog - NYTimes.com
He will never admit that the fraud-laced Bubble Business Cycle created an oversupply problem and that demand he mentions was not real.
"I was in a Dunkin Donuts last week. The guy in front of me pulled out his Amex to pay for a cup of coffee and 2 donuts, $3. The guy behind the counter wouldn't take it. The dude didn't have the $3 and after hollering at the guy stormed out w/o his coffee and donuts
Anonymous"
I don't have cash all the time. Instead of getting charged a fee at an ATM, I'll gladly charge $1.50 at 7-11.
Kudlow is a fool
On the contrary, he's very smart.
He's one of the few actors who is making paid good money to play an outrageously funny character on television.
"You calculated risk are too too negative. You have Good show of information of course.
USA is the greatist country in the world and all should be greatful who live in the USA. Interesting all nations want to get into the USA. Hmm......"
You do know that sucking up doesn't help with a green card application ?
BG thanks!
You do know that sucking up doesn't help with a green card application ?
jamie
LMAO, thanks for the laugh, I needed it today...
"I don't have cash all the time. Instead of getting charged a fee at an ATM, I'll gladly charge $1.50 at 7-11.
Elvis | 12.24.08 - 1:13 pm | # "
Besides, that's 1.5 miles towards my next airline trip or upgrade.
Good writing on the Bush admin. use of religion, prevarication and neo-conservatives to rule the nation.
PREVARICATION AND THE ART OF RULING
"You do know that sucking up doesn't help with a green card application ?
jamie | 12.24.08 - 1:13 pm | # "
Let me say from personal experience. Cut out the sucking up and stupid jokes (CR humor is really bad) when dealing with INS. It really doesn't work.
FYI - 30 yr mortgages are now at 5.25...so much for the Fed lowering them with their latest ponzi scheme
We are all Tiny Tim now
12th-I'm hoping friday stays flat for my next buy in...
I'm hoping those crooks drive it to $40. I'll buy more. And i started buying in at $120 and have bought all the way down. I'm down $50,000 so far. they amuse me. I can remain irrational longer than they can remain solvent.
shop til you drop.
Persecuted Comrade Anonymouse writes:
We are all Tiny Tim now
Persecuted Comrade Anonymouse
Is that Dickens' Tiny Tim, or the Bill Murray spoof Tiny Tim in the Christman Caroll? Because that Tiny Tim had an AK and kicked some ass and took names...
The savings rate will shoot much higher if we let foreclosures run their course. There is no better way to increase savings then to get Americans out of their $2,500 a month mortgage and into a $1,500 rental apartment.
I fear however that our Congress critters that have pushed "homeownership" for decades are going to do everything they can to keep the ignorant paying that $2,500 a month mortgage when they could walk away and be better off.
Ft Meyers Fl now down 66% from the peak
news-press.com | Southwest Florida | The News-Press
Howard Davidowitz on CNBC commenting on the Christmas retail and jewelry business: "We have a catastrophe...it's in the tank"
Oriental chick cut him off
I'm hoping those crooks drive it to $40. I'll buy more. And i started buying in at $120 and have bought all the way down. I'm down $50,000 so far. they amuse me. I can remain irrational longer than they can remain solvent.
shop til you drop.
12th Percentile
You're my new role model(except the down $50g's part)
How much real saving is going on vs defaults and BK?
"U.S. consumers are falling deeper into debt, an official at one of the largest U.S. credit bureaus told Reuters on Tuesday, as the U.S. recession deepens and job losses mount. Dann Adams, president of U.S. Information Systems for Equifax Inc, said the already high rate of personal bankruptcies could increase. "We've seen a continued ramp up of delinquencies across the board," he said. That would pile more bad debt on banks already struggling to cope with heavy mortgage-related losses. Consumers are missing payments on mortgages, credit cards, and auto loans, Adams said, adding that Americans may be growing more reluctant to take on new debt and more willing to save."
Dear Prof. Krugman: I got your fake demand right here: "Bank of England failed to act on 'crazy borrowing', deputy admits."
Bank of England failed to act on 'crazy borrowing', deputy admits - Telegraph
I've watched CNBC a bit lately. Kudlow seems to always have the most pedestrian observations that are tainted with a simpleton's idealism. Yet, people like Marc Faber, Joe Kiernen and many guests, who actually are smart, treat him with such deference. Why is that? Was he at some point a respected commentator? Does he have strong political connections or ownership in GE?
ew thread
Why is that? Was he at some point a respected commentator? Does he have strong political connections or ownership in GE?
lama
He's Immelt's bottom boy, pillow biter
Anonymous writes:
I've never understood the visceral hatred that American conservatives have for Jimmy Carter. I mean isn't fiscal responsibility, saving, frugality the bedrock of conservatism?
I can haz bailouts | 12.24.08 - 12:34 pm | #-------------------------------
An honest person is feared by those who aren't.
They probably fear Kudlow. I mean, you never know how a crack-head will react when you take away is blow.
You're my new role model(except the down $50g's part)
that takes some getting used to. It isn't for everyone. for those that prefer to invest based on what they say on CNBC, it probably seems a bit crazy.
talk to me in march.
sdtfs writes:
Don't forget that merchant would likely have to give up 3 to 6 percent to the CC companies for the privilege of taking their cards, not worth it.
Profit margin on coffee is north of 50%, so actually was worth it
I think the other thing this shows is that people are way off when they're comparing our situation to the lost decade of Japan's crisis. The savings rate trends are some of the best indicators that we're not Japan ... yet. Also, this is a good predictor of what consumers will do with stimulus money - it won't do much to stimulate even if they do just put it into banks. An increased in deposits won't create more lending comfort for large creditors.
Anonymous,
So, he has friends in mgt at GE.
I figured it was something close to home, so to speak.
I'm not sure if my choices are anecdotal but all of my savings are at home in my shiny new safe. Is that figured into the savings rate?
Jimmy Carter was the best example of what an American President should be since Truman. Maybe Eisenhower.
reptillian writes:
Hmmm. What happened about '84? Looks like there has been a downtrend in the savings rate since then. I won't say its Reagonomics until I know so. Another Ben, Ben Franklin, said, "Neither a borrower nor a lender be."
The 1981-82 Reagan recession was the worst since the 1930s and almost destroyed the economy and his presidency. I called Fed Chairman Paul Volcker, on St. Patricks Day 1982 as I recall, practically begging him to ease monetary policy by buying bonds with newly created dollar liquidity. Gold was at $310. You want me to inflate? he asked incredulously. No, I just want you to stop the deflation, or all the dollar debtors in the world will go bankrupt.
The deflation ended by accident in the week of August 11, 1982, when Volcker was faced with a crisis in Mexico, which could not pay interest on its $80 billion in debt to U.S. banks. He had to tell the Reagan Treasury he could no longer worry about the money supply because he had to monetize $4 billion in Mexican peso bonds. The price of gold rose $56 that week and the financial markets skyrocketedbonds, stocks, the S&P 500, with Nasdaq out front. Monetary policy had been twinned with tax policy, both going in the same direction. The Reagan boom had begun.
So much for the saving idea.
"I don't have cash all the time. Instead of getting charged a fee at an ATM, I'll gladly charge $1.50 at 7-11.
Elvis | 12.24.08 - 1:13 pm | # "
Besides, that's 1.5 miles towards my next airline trip or upgrade.
xxxxx | 12.24.08 - 1:17 pm | #
I run everything through Amex. I pay it off every month and enjoy a healthy check at the end of each year. Besides, why would I want to pay for a transaction fee I didn't use by paying with cash? You really think the merchant pays those credit card fees?
"Let me say from personal experience. Cut out the sucking up and stupid jokes (CR humor is really bad) when dealing with INS. It really doesn't work."
Can I have that in everday English ? I'm a simple soul from a simple background and I have no need of a green card. Does that make me persona non grata ?
I'm not sure what the "true" savings rate is, but I would argue long and hard that the statistic calculated as savings rate by the BEA is NOT it.
There's a very strong argument for excluding unrealized capital gains, as the BEA does, and that's fine. The BEA also excludes realized capital gains, and while that's an arguable point, you can give them the benefit of the doubt. HOWEVER. When the BEA goes on to subtract the capital gains taxes paid on realized capital gains without including the aftertax value of realized capital gains in the savings rate, they've clearly missed something important.
In a way, it's nice to know that CR is human and misbelieves in something (that seems badly flawed, like the BEA savings rate) just like the rest of us do, although a lot more frequently.
This URL is a pretty good discussion of the issues, from the BEA website:
http://www.bea.gov/bea/ARTICLES/2002/04April/0402PersonalSaving.pdf
I was surprised to see that just adding back consumer durables purchases to the savings rate (chart Two in the PDF file above) gains about 3 percentage points of absolute savings in 2000, and picks up about 2 percentage points of savings relative to the rate in the early 1980s (when durable goods purchases were proportionally less of income).
But the "true" savings rate is of rather less interest than the changes in the savings rate as measured, which has never included durables.
And what basis does Anarchus have for believing that durables were proprtionally less of income in the early '80s?
a lot of this so called "savings" is nothing more than debt destruction--IOW default.
Someone wrote above that if savings paid 18% today as they did around 1980 we'd probably see a higher savings rate. But as the graph shows, that didn't raise the savings rate.
That somewhat counter-intuitive phenomenon did not go unnoticed. Apparently people believed that with interest rates so high they wouldn't need to save as much -- they never foresaw that rates might have dropped to zero by the time they retired.
Reptillian, that was Polonias.
jm, if you'd bothered to open the .pdf file, which is an excellent report on components of savings, you'd have seen that just looking at "Chart Two" clearly shows that the gap between the official reported BEA savings rate and the unofficial durables added back in savings rate was about 1% in the early 1980s and about 3% in 2000.
Now. I don't have a Phd in economics, but I do have an MBA from the Wharton School of Finance, and I know for d*mn sure that we were taught that while macroeconomists ignore the "savings component" of consumer durables purchases that it is a partial fiction to do so - because when you buy a golf ball it's unlikely to last you more than a day on the links, but when you buy a new car or a new washing machine that's likely to last more than a year charging the entire purchase to "consumption" in the year bought is wrong.
In fact, to push the fiction a bit further, some washing machines ARE capitalized in the year of purchase and properly depreciated in the gov't accounts and some are expensed 100% in the year of purchase! What determines the difference? Well, when a laundromat business buys a new washing machine, GAAP accounting requires it to capitalize the purchase and then depreciate the thing over its useful life - but the same machine bought by a consumer has to be expensed (for BEA accounting purposes) 100% in the year bought.
Look at the savings rate graph...it's not a surprise that it correlates very well with the systematic export of US jobs to 3rd world countries. Take money out of the economy and less will be saved. It's simple economics.
The spike is due to millions of people saving money during and after foreclosure. Millions are also paying down unsecured debt. It's an excellent sign, and I hope that it continues.
Hopefully, the retail sector will learn that the middle-men-import-99%-of-product business model is not sustainable.
I'll be damned if I'll let you people sit here and badmouth Larry Kudlow.
Without joining in.
So here's something to ponder: Is it possible for Kudlow to come up with a statement so ridiculous that he himself could not say it?
I have a bit of a dumb question. Looking at the graph, it looks like there was a secular trend shift away from saving money around 1983-1984 (aka just before I entered kindergarten). I do know that savings were a bigger deal in the 70s and whatnot. Anyone has a good idea why the secular trend changed? I know it's been covered somewhere. I'd just like to know where.
People generally save more when they feel a greater need to put money aside for the future. When the future looks more finacially secure they save less.
Stock market profits were easy during the 1990s, as were real estate profits until recently. People thought their easy gains on stocks, and then real estate would be their savings.
The savings rate declined as people became less concerned about risk. They are becoming more concerned now.
Anon: The great bull market in stocks took wing in 1982, and along with that long-term interest rates collapsed from 11%-12%.
Important to note that if everyone has their money in high interest coupon bonds, that income generates "savings", while if everyone has their money in stocks generating (admittedly ephemeral capital gains) positive returns that counts as "nothing" except the dividend yield component.
It is also true that the official measure of the savings rate is a bogus number. It does not measure savings - it is an incomplete derivative calculation.
Realized and taxed capital gains on stock during the 1990s, and real estate gains a few years ago reduce the measured savings rate. As we have less profit from our investments the measured "savings rate" will decline - even if we are actually saving more of our income.
Should be "as we have less profit from our investments the savings rate will increase"
Realized investment gains perversely reduce the savings rate. Unrealized investment gains are not counted.
As people now sell and realize capital losses, those losses will perversly increase the official savings rate.
The more we lose the better savers we will appear to be.
But I do think that Americans did go on a buying binge that accelerated over the last 20 years.
This was partially enabled by credit, and motivated by low prices. The wealth effect (rising stock prices and then their real estate) gave them the confidence to save less and spend more.
"Family net wealth, the nations true savings rate, advanced 8 percent in 2005 to a record level of $52 trillion"
Just illustrates how clueless and blinded by their own knowledge of the details and minutae of these so called financial experts were. Yeah...blow up credit...use that credit to bid up asset prices...and we are all rich!
Proven moron. If he did not get it then...he likely still does not get it.
Family net wealth would be a good measure if the underlying asset values were sustainable, and not cyclical.
It's no coincidence the savings rate was the lowest, and even negative, during the last bubble.
Net worth as an aggregate means nothing in a bubble. You might as well keep track of everyone's salary in terms of barrels of oil. Has everybody's salary tripled in the last 12 months simply because they can buy 3 times as much oil with that money? Of course not.
Compare this personal savings rate to the personal credit issuance over the same period.
Zephyr wrote:
Realized investment gains perversely reduce the savings rate. Unrealized investment gains are not counted.
As people now sell and realize capital losses, those losses will perversly increase the official savings rate.
But that is not so. As one can find in the pdf referenced by Anarchus:
Because national income is defined as originating from current production of goods and services, it excludes capital gains. Capital gains originate from revaluations of existing assets rather than from production of new goods and services. Besides insuring the conceptual consistency of the NIPAs, the treatment of capital gains as separate from national income has three noteworthy advantages.
First, with capital gains excluded from income, national saving becomes conceptually equal to domestic investment plus net foreign investment ...
Even more importantly, a capital gain can be realized only by the sale of the capital asset in question, and the income from that sale comprises a transfer to the seller from the buyer. So the gain has no associated investment component except to the extent that it reflects a genuine increase in the value of the sold asset as productive capital. Since that value exists even if the asset is not sold and the rate at which such gains are realized is unsteady, and the fraction of tradeable asset price increases that represents genuine value increase (as distinct from speculation) is also unsteady, there is really no practical way to quantify it as a component of savings, and it is better just to assume that it does not fluctuate so greatly as to invalidate the information provided by the components that can practically be quantified.
Moreover, and most importantly, the savings rate measure used by the BEA quantifies what fraction of current income-generating activity is directed to ends other than current consumption (with a small error* to the extent that some fraction of durable goods consumption has the nature of saving).
*Largely irrelevant to interpretation of the graph presented by CR, as it is small relative to the 16-year descent of the savings rate from 12% to 0%.
Anonymous writes:
As the chart shows, our last honest president, the great Jimmy Carter saw a 50% increase in the savings rate, going from 8 to 12%. History will vindicate Jimmy as sure as it will eviscerate Bush.
Anonymous | 12.24.08 - 12:22 pm | #
ROLMAO! You are an idiot. Recently, your beloved Carter has been lamenting for Hezbollah because they don't have enough weapons to defend against Israel. One thing is for sure, Carter defends Islam, the religion of pure hate. Add up the achievements of Israel against the entire Muslim world- hands down, Israel has benefited mankind orders of magnitude more than all Muslim nations combined. May you not have a Merry Christmas you Jew hater.
jm, I agree that counting capital gains is problematic. But you missed the point. The measure of savings includes a reduction for taxes paid on capital gains while ignoring the benefit of the gain itself. Good accounting would either include or exclude both aspects of the transaction.
And peoples' perception of their gains (valid or not) is very relevant to their spending habits. The wealth effect is very real.
The observed decline in saving mostly reflects actual decline in savings as people did spend more (the wealth effect, cheap import prices, easy credit). But part of the observed decline is from the errors related to growth of income taxes on capital gains.