US Savings Rate Goes Negative
Eric Anderson
bonds i forget off the top of my head
so yeah people are saving for retirement via the market instead of the bank cd,
perfectly rational behavior
galli...@webtv.net wrote:
> I don't know if I like the sound of this. From today's Boston Globe:
>
> ***************************************
>
> US SAVINGS RATE DROPS TO ALL-TIME LOW, REPORT SAYS
>
> Associated Press
>
> WASHINGTON - American consumers went on a buying binge in July, ratcheting up
> spending twice as fast as their incomes grew. That drove down the nation's
> personal savings rate to the lowest point ever recorded.
>
> After spending cautiously during the spring, consumers splurged last month,
> increasing their spending by a brisk 0.6 percent, the biggest jump since
> February, the Commerce Department reported yesterday.
>
> Spending rose a little bit faster than the 0.5 percent gain many analysts
> were anticipating.
>
> Americans' incomes, including wages,interest and government benefits,
> meanwhile, grew by a modest 0.3 percent in July, matching analysts'
> expectations.
>
> Analysts said people are feeling wealthy and in the mood to spend...
>
> All that spending pulled down the personal savings rate---savings as a
> percentage of after-tax income---to a negative 0.2 percent in July, the
> lowest monthly rate ever.
>
> **********************************
>
> Lisa
>
> Sent via Deja.com http://www.deja.com/
> Before you buy.
galli...@webtv.net
JHogan2359
>Date: 8/29/00 8:38 PM Central Daylight Time
>US SAVINGS RATE DROPS TO ALL-TIME LOW, REPORT SAYS
>
>Associated Press
>
>WASHINGTON - American consumers went on a buying binge in July, ratcheting up
>spending twice as fast as their incomes grew. That drove down the nation's
>personal savings rate to the lowest point ever recorded.
>
>After spending cautiously during the spring, consumers splurged last month,
>increasing their spending by a brisk 0.6 percent, the biggest jump since
>February, the Commerce Department reported yesterday.
>
>Spending rose a little bit faster than the 0.5 percent gain many analysts
>were anticipating.
>
>Americans' incomes, including wages,interest and government benefits,
>meanwhile, grew by a modest 0.3 percent in July, matching analysts'
>expectations.
>
>Analysts said people are feeling wealthy and in the mood to spend...
>
>All that spending pulled down the personal savings rate---savings as a
>percentage of after-tax income---to a negative 0.2 percent in July, the
>lowest monthly rate ever.
This is amazing.
According to Grinch, the US has a "savings rate" of over 8%, the highest in the
OECD (Organization for Economic Cooperation and Development).
Something is severely wrong here.
The US Commerce Department and the OECD either must have wildly differing
definitions of "savings," or one of them is lying.
Grinch
>>From: galli...@webtv.net
>>Date: 8/29/00 8:38 PM Central Daylight Time
>
>>US SAVINGS RATE DROPS TO ALL-TIME LOW, REPORT SAYS
>>
>>Associated Press
>>
>>WASHINGTON - American consumers went on a buying binge in July, ratcheting up
>>spending twice as fast as their incomes grew. That drove down the nation's
>>personal savings rate to the lowest point ever recorded....
<snip>
>This is amazing.
>
>According to Grinch, the US has a "savings rate" of over 8%,
Over 7%
>the highest in the
>OECD (Organization for Economic Cooperation and Development).
No, the highest of the countries I mentioned.
(Try to get *one* fact right.)
>Something is severely wrong here.
>
>The US Commerce Department and the OECD either must have wildly differing
>definitions of "savings," or one of them is lying.
Or you don't know the difference between national savings and personal
savings.
Mike Coburn
I think that each bevy of statisticians seem to read
different tea leaves in conjuring their numbers. It
is 1984 in the year 2000. What numbers would _you_,
as an individual or political force, like to see, and
how much money you got to buy these numbers?
--
Coburn ---
The opinions expressed herein above are mine. They are my property
so you can't have them. But use them. No rent or interest due.
js...@my-deja.com
Eric Anderson <eand...@bellsouth.net> wrote:
> Savings rate is flawed, doesnt include stocks, real estate, maybe not
corporate
> bonds i forget off the top of my head
> so yeah people are saving for retirement via the market instead of
the bank cd,
> perfectly rational behavior
>
> galli...@webtv.net wrote:
>
the bubble will never burst. Technology has changed everything...the
way it did in the 1920's.
Grinch
And everybody who is economically literate knows the personal savings
rate is artificially deflated by a rising stock market, as a
statistical artifact of the way the savings rate is computed:
Income-taxes-consumption=savings : Savings/income=savings rate.
With capital gain *not* included in income. So taxes paid on capital
gains are "dis-savings" while capital gains themselves are *not*
included in savings.
For instance, take a person who earns $50k/year, saves 10% of it every
year, and has lifetime savings of $200,000 in the stock market.
Compare a year in which he takes no stock market gain to one in which
he takes a 20% gain, of the sort the market has been producing in
recent years.
1. No gain:
Initial stock holdings: $200,000
Gain on stock: $0
Income: $50,000
Cash savings: $5,000
Gain in wealth: +$5,000, +2.5%
Savings rate: 10%
2. Gain:
Initial stock holdings: $200,000
Gain on stock: $40,000
Tax on gain: $ 8,000
Income: $50,000
Cash savings: $5,000
Gain in wealth: + $37,000, +18.5%
Savings rate: -6%
So while saving the *same* 10% of income, adding $32,000 of after-tax
wealth reduces your personal savings rate from +10% to -6%.
($5,000 savings - $8,000 tax dis-savings = -$3,000 savings)
You've got negative savings, you spendthrift! How do you ever expect
to prepare for retirement that way?
But we can fix that. Let's have the stock market drop 20%.
3. Loss
Initial stock holdings: $200,000
Gain on stock: -$40,000
Tax on gain: $ 0
Income: $50,000
Cash savings: $5,000
Gain in wealth: - $35,000, -17.5%
Savings rate: 10%.
Ah, now your savings rate is fixed back up to 10%, at the mere cost
of being $35,000 poorer, costing you seven years of savings. You'll
now no doubt feel much better about your ability to finance your
future, thanks to this increase in your savings rate. ;-)
galli...@webtv.net
But another article stated that people "were" actually spending more, by
resorting to home equity loans and credit cards. (You forgot to factor in
household debt in the above scenario. And don't forget that investors also
buy on margin.)
People are anticipating that the stocks they've bought will forever
appreciate in value. They're betting the farm on stocks and loans. This
doesn't sound good to me.
JJ
statistics are compiled!
galli...@webtv.net wrote in message <8ohoic$qml$1...@nnrp1.deja.com>...
Grinch
But now you are changing the subject.
Before you were worrying that a zero personal savings rate means
people are saving zero. That's not at all true. As the examples above
show, people can be saving as much as ever with a negative savings
rate, as it is computed.
BTW, another statistical artifact that artificially deflates the
savings rate is purchases of long-lifed items such as cars. If in
example #2 above you used your $32,000 after-tax gain to buy a car,
100% of that is counted as consumption, your total "dis-savings"
becomes $35,000 and your negative savings rate becomes -70%!
This is in spite of the fact that you do not consume your car when you
buy it. Assuming a five-year useful life for it, you consume $6,400,
leaving $25,600 of value in it.
That means your net worth increases for the year by $30,700 --
with a -70% savings rate! Think that might skew the statistics some?
The result is that when sales of cars and similar items boom, the
reported savings rate drops by *much more* than the real consumption
of them rises. And when sales of cars and similar items slack off,
the reported savings rate rises more than actual savings do.
If you read the reports, last month was a record sales month for new
cars. It's not a coincidence.
>People are anticipating that the stocks they've bought will forever
>appreciate in value. They're betting the farm on stocks and loans. This
>doesn't sound good to me.
People aren't anticipating stocks (plus homes, family businesses, all
other capital assets) will rise forever. They are anticipating that
these things won't plunge in value.
If you actually look at the data on the Federal Reserve's web site,
you will see that net household wealth is rising at all levels.
People have increased borrowing, but by only a portion of the gains
they have already received. Households are wealthier than ever.
As for the stock market, if there ever was a bubble it's dissipating
and isn't what it used to be.
A year ago a lot of people (including the Fed's market model) were
saying the stock market was 40% overvalued. Since then the Dow has
fallen 2% and corporate profits are up 20%. So half the "bubble" is
gone. Profits are still coming in at a +15%-20% rate, and if they
keep doing so for another year with a flat market the "bubble" will be
gone entirely and people will be saying "What bubble? There was never
any bubble."
The "bubble" is looking more and more like a routine stock market
event that took place this time on a big scale: stock prices surging
on the expectation of rising earnings, then staying flat as earnings
actually rise and catch up.
Grinch
wrote:
>
>That means your net worth increases for the year by $30,700 --
Ooops, typo. $30,600.
Eric Anderson
equity loans I have no idea where they stand, I also dont know exactly where
margin debt stands right now (and am not terribly interested in it anyway) but
I would be surprised to find it's anywhere near the levels prior to the beating
we took in mar, apr, may
Thats not my point anyway, my point is that you are wrong to characterize
investing in the stock market as "betting the farm". Stocks go up and down,
markets go up and down but the overall trend of the market is up and will
remain so for the forseeable future. The predominant risk in the market
(assuming you dont put all your money in dogs) is time, given enough you're
investment will grow at a greater rate than any other vehicle.
Now I contend that the normal bull/bear cycle is somewhat changed simply
because the general public is much more astute about these things than they
were even 10 years ago, which is a beautiful situation for many people. I
also contend that we wont see a major bear for about 7-10 years, barring acts
of god, a huge spike in unemployment and maniacal politicians. It's no big
mystery, simple demographic trends bear this out.
So please dont apply depression era thinking to todays market (the fact is it
is very different today than 1929), if you spend a little time with it youll
find the market rewards diligent behavior handsomely
> But another article stated that people "were" actually spending more, by
> resorting to home equity loans and credit cards. (You forgot to factor in
> household debt in the above scenario. And don't forget that investors also
> buy on margin.)
>
> People are anticipating that the stocks they've bought will forever
> appreciate in value. They're betting the farm on stocks and loans. This
> doesn't sound good to me.
>
Lance Ringquist
you seem to not understand the new economic reality here, outrageous
debt made by drunken sailors is the new reality.
they simply cannot fail because in there arrogance they said so.
the old theory's about not spending more than you take in is simple
passe.
please just look at the horrendous trade deficit, and the soon to be
ballooning again federal deficit, and you will see that they know whats
best for us(er, i mean the world).
debt to them simply does not matter because the socialist for the
rich(greenspan) will simply bail them out, and they will call it "market
forces".
galli...@webtv.net
Greenspan "bailed out Mexico," and we all know what happened to ordinary
Mexicans, who never even thought about the Mexican stock market, let alone
invested in it. They became much poorer because idiot investors refused to
take their losses like the good capitalists they supposedly are.
Business Week ran an article titled "Is the US Building a Debt Bomb?" The
article ran in a late 1999 issue, probably around November. I wish I had it.
Debt has ballooned like never before. Households are going into hock,
businesses are going into hock, investors are going into hock...Margin debt
on the NYSE went from $140.1 billion in'98 to $$228.5 billion one year later?
How can this be reassuring?
Here's a link for you to read.
http://www.thenation.com/issue/000124/0124greider.shtml
I think it's been one long tulip festival.
Grinch
>Margin debt
>on the NYSE went from $140.1 billion in'98 to $$228.5 billion one year later?
>How can this be reassuring?
Margin debt is 1% of stock market capitalization.
How can that be scare anyone?
Grinch
>........
> Debt has ballooned like never before. Households are going into hock.
Where does this silliness come from?
If you are really worried about "ballooning debt", I hope the facts
that follow will reassure you....
Data on household worth from the Federal Reserve
[ http://www.bog.frb.fed.us/releases/Z1/Current/ ,
courtesy of Prof. Flaherty ]
US households' net worth -- that is, assets minus debt:
Actual net worth (billions)
1999 $41,821
1993 $24,106
That's *up* by how much? ;-)
And here's the household debt-to-asset ratio:
1999 0.140
1993 0.151
Hey, it's LOWER than six years ago!!
But hasn't household debt been rising?
Sure!
Total household liabilities (in billions):
1999 $6,838
1993 $4,290
Wow... up more than 50%.
But what about assets?
Household assets:
1999 $48,660
1993 $28,396
WOW!!!
But that's got to be due to that crazy stock market, right?
Nope.
Household net worth minus the increase in value of corporate
securities, mutual funds, and pension funds since 1993:
1999 $29,403
1993 $24,106
Dang! Still UP in spite of all that borrowing -- even *excluding* the
stock market *and* pension funds!!
And, yes, it's the same basic story for business.Since 1993,
corporate business net worth has risen 63.6%, and the debt-to-asset
ratio has FALLEN from 0.529 to 0.497.
Looks like the "debt bomb" is a dud, eh?
Feel better now? You should.
Except maybe you should be a little peeved at all those who've been
feeding you "debt scare stories" without referring to these facts.
>Margin debt
>on the NYSE went from $140.1 billion in'98 to $$228.5 billion one year later?
> How can this be reassuring?
As noted elsewhere, margin debt is all of 1% of stock market
capitalization. Does that *really* scare you?
>Here's a link for you to read.
>http://www.thenation.com/issue/000124/0124greider.shtml
Aw, Greider as his typical old self -- willing to contradict himself
six times in two paragraphs to bash whomever he wants to bash.
Let's see... Grieder's spent years bashing Greenspan for a
"suppressing economic growth and thus depressing wages" .. yup, there
he goes again ... except wait, "But didn't Greenspan also engineer the
booming economy?" Well let's not give him any credit for that! ;-)
Greider's wonderful! At the same time he damns Greenspan for both
"suppressing growth" *and* irresponsibly letting the boom run wild!
What other writer could get away with that? ;-)
(Does The Nation actually have any editors who read submissions for
coherence?)
"If the worst happens, the blame rightly starts with Greenspan"
OK.... *if* it does.
But as the best is actually happening -- historic growth combined with
inflation formerly thought impossibly low in such circumstances --
does Greenspan deserve any credit??
No way!! We'll just assume the worst will happen later and damn
Greenspan for it in advance. And in the meantime ...
"...he refused to use the Fed's best tool for slowing down stock
market speculators--raising the margin requirement on investors'
borrowing."
Sure, Bill, margin finances all of 1% of stock. That's the "best tool"
for squeezing the market. Good thinking there...
"The chairman also got very lucky (as did America at large) because
the global financial crisis produced falling prices"
ROTFL! The global financial crisis was *good luck* ! ;-)
Go back and read what Greider was writing about the financial crisis
*then*, when it happened. He was saying it was bound to be the ruin
of America and of Greenspan's disastrous policies.
Now it was good luck! LMAO! ;-)
"But the United States is now ...a net debtor position internationally
equal to an astounding 18 percent of GDP"
"Astounding"! Hmmm., let's see how much that is...
At an 8% interest rate, it would cost all of 1.4% of national income
to service that debt. Can you imagine carrying a debt burden so
heavy??
Except we don't have to, because another little detail Greider omits
is that the US earns a higher average interest rate on its investments
abroad than it pays on its debt owed to abroad -- so even as a "net
debtor" the US has for years earned net income from its international
investment position. Things just evened out a few months ago in 1999,
and right now its about a wash. Which means that basically, on net,
we have use of all that foreign capital for free!
How terrible. ;-)
BTW, just how often have you seen Greider and The Nation relate the
actual household wealth data from the Fed listed above, in all their
worrisome stories about how debt is going to kill us all?
>I think it's been one long tulip festival.
You know, one interesting thing about the Dutch "tulip mania" is that
it didn't hurt the Dutch economy at all. No Depression, no recession,
no slump at all resulted -- the Dutch economy just kept booming along.
That another fact that usually gets omitted by those who tell scare
stories. I wonder why that is?
>Lisa
I know that some people just have a need to worry and fret that
"the end" is just around the corner.
But if it is, it isn't going to come from debt.
So if you've been genuinely worried about "households going into
hock", I hope you can find some reassurance in the real facts.
And remember the personal savings rate is higher than it looks too ...
and that the US's national savings rate is about the highest of any
major developed economy:
National savings rates:
United States 7.4%
Germany 7%
France 6%
Canada 5%
Britain 4.1%
Sweden 3.8%
etc.
I bet you didn't know that either. ;-)
galli...@webtv.net
DJR80
have a feel for this one - anyone know what it amounts to?)
Dan
in Philly
Grinch
>In article <96nrqsslnvhkj97nm...@4ax.com>,
> oldn...@mindspring.com wrote:
> So total capitalization on the NYSE would be around $22.8 trillion?
The NYSE isn't "the stock market".
The stock market's capitalization is over $16 trillion and margin debt
at its peak approached all the way up near 1.5% of that (wow) but has
since gone back down. Have your sources informed you of its fall as
they did of its rise?
Before trying to pick nits, read my other post giving the real numbers
on household wealth and national savings.
After that, if you are still picking nits with anyone other than
Greider and his friends who've been scaring you with all the "debt
bomb" talk, then you aren't sincere.
>
Eric Anderson
digging through the numbers as the previous post annoyed me to the point that I
was ready to do so even though it's not what I had planned for today ( the
comparison of the us to mexico is just asinine and undeserving of response, but
the other stuff does), for no other reason than I find it very distressing to come
across so many people unwilling to avail themselves of the opportunities offered
by the market, it's just sad. I also find it very annoying that I have to fund
the retirements of these breathtakingly ignorant grasshoppers.
However, I want to expand on the assertion that there wasnt an economic cost to
the tulipmania episode.
There is a fellow who did an in depth study of the interrelatedness of the global
economy from a historical view. Essentially his point was that if one country
fell, the neighboring countries will fall in a few years. I had thought (although
I may be wrong) that he had shown that the collapse of the Dutch tulip markets
ushered in a depression that went beyond holland and into the neighboring european
countries. I cant remember the guys name, probably it came from a fed
publication, and like I said I might be remembering it wrong as it was a few years
ago. It could just be an apocryphal story lodged in my memory as fact incorrectly
attributed to this fellows work.
I'm also going to refer to Mackays book "Extraordinary Popular Delusions and the
Madness of Crowds" - "Thus the mater rested. To find a remedy was beyond the
power of the government. Those who were unlucky enough to have had stores of
tulips on hand at the time of the sudden reaction were left to bear their ruin as
philosophically as they could; those who had made profits were allowed to keep
them; but the commerce of the country suffered a severe shock from which it was
many years ere it recovered."
On the other hand, in Edward Chancellors book "Devil Take the Hindmost" we find-
"However the collapse of the Tulip Mania did not cause a national economic
crisis. N.W. Posthumus, the historian of the Tulip Mania, refers to a more modest
"upheaval in the whole western part of the Republic"
So I dont know which it was. I do know however that it is rather incorrect to
compare a 17th century commodities market to a 21st century equities market
beyond the observation that occasionally the crowd gets a little insane. I
really take exception to comparisons of commodity and equity markets in general,
there are just substantive differences that invalidate all but the most broad
strokes. They both work on supply and demand ultimately but the supply/demand
equations are just different. The next logical step would be to compare social
security to a ponzi scheme, and we dont want to do that do we?
Disclaimer: I make money up or down so I could care less which way the market
goes, but I aint gearing up to go short in the upcoming round. In fact, now that
I think about it, this is the first time in a few years I havent carried at least
one short on the books.
Lance Ringquist
great article.
i read the nation from time to time, and i like many articles in it,
that one was good.
again i say to the "outrageous debt is good bunch as long as the
taxpayers foot the bill for our excesses" that this cannot last, every
balloon runs out of air no matter how much is pumped into it.
you cannot patch it forever, soon the material loses its elasticity.
JHogan2359
>From: Grinch oldn...@mindspring.com
This is an amazing thread, one for the history books.
Almost all of the fallacies known to man have been claimed by the detractors
of a fairly simple proposition: Do people save more or less?
The vast majority of people consider "savings" as that amount that they have
stuck away somewhere for a rainy day, and that is readily accessable in an
emergency. That of course is the commonly-held definition of the word
"savings." Most people would not view stock market purchases as "savings," but
rather as "investments." That economists have devised another definition does
not alter the real meaning of the word, as it is commonly understood..
The most obvious difference is that "savings" cannot vanish, whereas
"investments" in the stock market, or some other enterprise is subject to the
whims of others, and can vanish, or be degraded to the point that the
individual will have less than he started out with.
If the arguments of some are to be believed, then "savings"occurs by spending
money! Does anyone in their right mind really believe that they "save" money
by buying a new car? (For one thing, it instantly depreciates in value by at
least 10% the moment it is driven off the lot.)
Or that the stock market can only go up, and not down? Profits in the stock
market are primarily the difference between the amount paid out in wages and
the prices collected by the seller. That means that one way for profits to
increase is for wages to either fall or to remain relatively stagnant, while
prices rise. This is "productivity," in its simplest form.
(Let me interject that "profit" is not a four-letter word. It's just that the
majority of the gains in the economy have gone to the top, as if someone stood
the economic pyramid on its head and shook it. [Try standing a pyramid on its
head sometime, and see how stable it is.] The "trickle-down" didn't trickle. )
Then it is claimed that households are "wealthier" than ever. There is no
doubt whatsoever that most of the wealthy (the uppermost 1% of the population)
have seen a huge increase in their net worth over the past 20 years. Nor is
there much doubt that the rest of the have seen some gains, too.
But here's the rub: The richest people in the land have seen their fortunes
double (or thereabouts), while most of the bottom, say 80% have seen the most
meager of increases.
For more about this, see:
http://www.nytimes.com/library/financial/083100income-econscene.html
EXCERPT:
..."Despite significant gains recently, however, the median male worker has
fared poorly since the 1970s. In fact, adjusted for inflation, the median
worker in the 25-to-34 age group earned 13 percent less in 1998 (the latest
data available) than the median worker of the same age in 1973.
Median workers in the 35-to-44 age group earned about 9 percent less in 1998
than their counterparts 25 years earlier. And the 45-to-54 median-income group
essentially stagnated since 1973, up only slightly. By comparison, in the
post-World War II period, median incomes for these age groups rose by 50 to 100
percent over 25 years." ...
END EXCERPT
What really chaps my buns is that some people will try to use the argument that
since the TOTAL wealth increased, then it means (by implication) that all have
prospered. This is not so.
It is a "fallacy of the mean."
JJ
idea of what is included in PCE in that report. That is Personal Consumption
Expenditures, which has a category "services."
JHogan2359 wrote in message
<20000829220950...@ng-ba1.aol.com>...
galli...@webtv.net
I couldn't open those links because they contain information my Webtv can't
use. I'm sure you've posted accurate figures.
What you've posted are averages, which can't be accurate in a two-tier
society such as ours. The gap between the bottom fifth and top fifth, or
even the bottom and top third, is at this point so yawning, that averages
mean nothing.
Given that the dollar has lost 20 percent of its buying power in the last
generation, given the steep rise in the cost-of-living, given the stagnating
wages much of the middle class and all of the working class, I'd venture to
guess that debt is concentrated in the bottom half of society, whose members
borrow simply to make ends meet. America now has two very distinct
classes---one debtor and one creditor. I notice Al Gore is effectively
sounding a populist message by appealing to "working families." Since the
Dems have truckled to Wall Street almost as assiduously as the Repubs have, I
must admit I'm not terribly impressed.
> And, yes, it's the same basic story for business.Since 1993,
> corporate business net worth has risen 63.6%, and the debt-to-asset
> ratio has FALLEN from 0.529 to 0.497.
>
> Looks like the "debt bomb" is a dud, eh?
>
> Feel better now? You should.
>
> Except maybe you should be a little peeved at all those who've been
> feeding you "debt scare stories" without referring to these facts.
I'm peeved because the mainstream press won't candidly admit that this
two-tiered economy was deliberately engineered.
> >Margin debt
> >on the NYSE went from $140.1 billion in'98 to $$228.5 billion one year later?
> > How can this be reassuring?
>
> As noted elsewhere, margin debt is all of 1% of stock market
> capitalization. Does that *really* scare you?
One percent of a very overcapitalized market. Let's put it this way---the
whole thing scares me. On the other hand, it might be nice to see some venal
investors take a bath. Unfortunately, innocent bystanders will get hurt, as
they did in Mexico.
> >Here's a link for you to read.
> >http://www.thenation.com/issue/000124/0124greider.shtml
>
> Aw, Greider as his typical old self -- willing to contradict himself
> six times in two paragraphs to bash whomever he wants to bash.
>
> Let's see... Grieder's spent years bashing Greenspan for a
> "suppressing economic growth and thus depressing wages" .. yup, there
> he goes again ... except wait, "But didn't Greenspan also engineer the
> booming economy?" Well let's not give him any credit for that! ;-)
Where's the contradiction? It's a two-tiered nation, and what's good for one
tier is bad for the other. Why can't the press just come out and admit this?
What are they afraid of---a little civic unrest? Another building blown to
Kingdom Come? Hey, it's not like this arrangement is a secret. Let Business
Week and the Wall Street Journal say it loud and say it proud---inequality is
grand and there's money to be made in misery! (The damn pussies. Is there
anything worse than a venal pussywimp?)
> Greider's wonderful! At the same time he damns Greenspan for both
> "suppressing growth" *and* irresponsibly letting the boom run wild!
> What other writer could get away with that? ;-)
I hardly think Greenspan can take all the credit for our lopsided economy.
It took years of union-bashing and outsourcing to debilitate the American
working class and some of the middle class.
Greenspan merely carries water for the rentier class. They want, more than
anything else, to keep inflation from eating away the value of their
investments. How does one head off the type of inflation that we experienced
in the seventies? Why, you make sure that there isn't a superabundance of
money chasing too few goods. There's only one way to do that---you have to
diminish the earning power of a large segment of the population. This has
been accomplished, with very notable success.
There's only one problem---this strategy can work too well. You can't
simultaneously pauperize half the population and expect them to be good
consumers. Eventually, production will grossly outstrip demand. Then you've
got too few dollars chasing too many goods, and deflation results. That's
still a great deal for folks who live off the interest on their banks
accounts, but it also means you've got the beginnings of a full-fledged
depression on your hands.
I think it's grimly humorous that a ferocious search for markets is going on
at the very time that potential consumers are being pushed up against the
wall. It's one of capitalism's core ironies---this drive to underpay people
and expect them to consume at the same time. It always ends badly, and no
doubt, will again.
> (Does The Nation actually have any editors who read submissions for
> coherence?)
I imagine so.
> "If the worst happens, the blame rightly starts with Greenspan"
> OK.... *if* it does.
>
> But as the best is actually happening -- historic growth combined with
> inflation formerly thought impossibly low in such circumstances --
> does Greenspan deserve any credit??
>
> No way!! We'll just assume the worst will happen later and damn
> Greenspan for it in advance. And in the meantime ...
>
> "...he refused to use the Fed's best tool for slowing down stock
> market speculators--raising the margin requirement on investors'
> borrowing."
>
> Sure, Bill, margin finances all of 1% of stock. That's the "best tool"
> for squeezing the market. Good thinking there...
Probably highly inadequate. And it wouldn't affect non-margin
capitalization, which, as I said, is grossly excessive.
> "The chairman also got very lucky (as did America at large) because
> the global financial crisis produced falling prices"
>
> ROTFL! The global financial crisis was *good luck* ! ;-)
It was GREAT luck, because it mean't that a lot of money that had been in
East Asia came here instead. Of course, that only postpones the inevitable
correction, which will make it all the more painful.
> Go back and read what Greider was writing about the financial crisis
> *then*, when it happened. He was saying it was bound to be the ruin
> of America and of Greenspan's disastrous policies.
They are disastrous for a lot of people in the here and now, but they are
temporarily silent about their distress. I noticed the papers mentioned that
the economy is cooling and jobs will be less plentiful. Wall Street
responded by climbing a few notches, of course.
> Now it was good luck! LMAO! ;-)
>
> "But the United States is now ...a net debtor position internationally
> equal to an astounding 18 percent of GDP"
>
> "Astounding"! Hmmm., let's see how much that is...
>
> At an 8% interest rate, it would cost all of 1.4% of national income
> to service that debt. Can you imagine carrying a debt burden so
> heavy??
>
> Except we don't have to, because another little detail Greider omits
> is that the US earns a higher average interest rate on its investments
> abroad than it pays on its debt owed to abroad -- so even as a "net
> debtor" the US has for years earned net income from its international
> investment position. Things just evened out a few months ago in 1999,
> and right now its about a wash. Which means that basically, on net,
> we have use of all that foreign capital for free!
Since the "hidden" costs of this "wonderful" economy are so high, I can only
wonder what the downside of those fabulous investments abroad are. A tidy
bundle invested in slave labor, maybe? Maquiladoras 'R Us, and not just in
Mexico, but all over the world. These facts, like the IMF-induced Indonesian
rice riots, are half-hidden from the view of the unwashed masses, who might
start questioning the mind pap they've been force-fed.
That's what I love so much about the American press---they do very little
reporting on labor issues, and they ignore the rest of the world. Chinese
workers could be burning down half the country, and it goes almost unremarked
on in our fabulously open, democratic press. (Of course, their press doesn't
remark on it either, but no one expects any better of them.)
>
> How terrible. ;-)
>
> BTW, just how often have you seen Greider and The Nation relate the
> actual household wealth data from the Fed listed above, in all their
> worrisome stories about how debt is going to kill us all?
I don't have the stats in front of me, but that wealth is incredibly
concentrated at this point. The figures almost defy belief.
I don't think imitating Guatemala is anything to be proud of, offhand.
> >I think it's been one long tulip festival.
>
> You know, one interesting thing about the Dutch "tulip mania" is that
> it didn't hurt the Dutch economy at all. No Depression, no recession,
> no slump at all resulted -- the Dutch economy just kept booming along.
But will WE?
> That another fact that usually gets omitted by those who tell scare
> stories. I wonder why that is?
I'm not the least bit worried about the 17-century Dutch. I'm worried about
21st-century Americans.
Lisa
>
> I know that some people just have a need to worry and fret that
> "the end" is just around the corner.
Occasionally, it is.
> But if it is, it isn't going to come from debt.
>
> So if you've been genuinely worried about "households going into
> hock", I hope you can find some reassurance in the real facts.
I'll just do what I always do...go numb.
> And remember the personal savings rate is higher than it looks too ...
> and that the US's national savings rate is about the highest of any
> major developed economy:
>
> National savings rates:
> United States 7.4%
> Germany 7%
> France 6%
> Canada 5%
> Britain 4.1%
> Sweden 3.8%
> etc.
High time to go numb. See ya.
Lisa
> I bet you didn't know that either. ;-)
>
>
Goretax tax Tax TAx TAX
> I don't know if I like the sound of this. From today's Boston Globe:
Don't know if it's the least bit true, actually:
If the USA has such a huge booming economy, how in the world
can America's savings rate be NEGATIVE??
This working stiff is saving over 10%. Actually more, if paying
down debt is included. Unemployment rate nationally is
near a 50-year low. Between Roth accounts, 401Ks, direct deposit
options, ya think perhaps the BLOB accidentally "forgot" to include
Americans' retirement savings in their so-called calculation?...
The BLOB is the "San Jose Mercury News" of the East.
The CNN of the North. Scamming the headline, never mind facts.
Bunch of silly brainless dolts, for the most part!
Any independent pro (or con) evidence to this absurd B-Blob allegation?...
...