Americans can't be trusted with their own money

[Tanager]

US savings rate at lowest level since the Great Depression

[LennyH]

I can hardly save a dime outside of my 401K. But my wife and I both put away close to the max in our 401Ks so I don't feel guilty if I need to take a loan out of there once in a while. It's always a safety net.

I'll bet a lot of people do the same and that could be contributing to this situation.

[crawjo]

With employment growth strong now, analysts said that different factors are at play. Americans feel they can spend more, given that the value of their homes, the biggest asset for most families, has been rising sharply in recent years.

This does not bode well for the future.

[hglord]

How is this statistic compiled? If bank accounts, stock purchases, real estate purchases, CDs, money market accounts, bonds, foreign investments, and anything else that I've left out are taken into account, where do they get the information?

If they really can and do know about all these investments for every U.S. citizen, there's more spying taking place on ordinary folks than just that stuff that the President talks about for avoiding terrorism. If they don't take all these investment vehicles into account, then the statistic is plainly wrong and not worth worrying about.

[Tom Storer]

Originally Posted by hglord

If they really can and do know about all these investments for every U.S. citizen, there's more spying taking place on ordinary folks than just that stuff that the President talks about for avoiding terrorism.

Speaking of which, someone just sent me the link to a rather well-done ACLU ad about "spying on ordinary folks."

[bluenoter]

Originally Posted by hglord

How is this statistic compiled? If bank accounts, stock purchases, real estate purchases, CDs, money market accounts, bonds, foreign investments, and anything else that I've left out are taken into account, where do they get the information?

If they really can and do know about all these investments for every U.S. citizen, there's more spying taking place on ordinary folks than just that stuff that the President talks about for avoiding terrorism. If they don't take all these investment vehicles into account, then the statistic is plainly wrong and not worth worrying about.

hglord--

You think too much and ask too many questions.

[Tanager]

It could be something as innocuous as (total after-tax income) - (consumer spending) = (amount saved). Dunno.

I would tend to think a more interesting debate might be that about to what extent (and how) the government can/should encourage savings. With all the talk of tax cuts for economic stimulus, I wonder if proponents have taken into account the long-term effect of encouraging consumer spending - I'm not saying the money would best be taken in as taxes, simply that are there ways of reformulating tax policy in ways that encourage savings rather than big-ticket spending? Someone like Gordon or Dr. Dave might have an interesting opinion here.

[Dr Dave]

To hear Ben Bernanke tell it, it doesn't matter that Americans don't save, because everybody else in the world does save and wants to lend us money.

"I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving--a global saving glut--which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today."

Read the whole speech here.

I don't know nothin' about nothin', but I don't understand why being in hock up to our collective ears is okay.

[Tanager]

Originally Posted by Dr Dave

To hear Ben Bernanke tell it, it doesn't matter that Americans don't save, because everybody else in the world does save and wants to lend us money.

But as I understand it (I'm disputing Bernanke's position, not yours), many nations (specifically those in Asia who have been buying up dollar-denominated debt and US currency) are starting to lose their appetite for our debt, and they're looking to broaden their portfolios more, which may not bode as well as he suggests. Maybe I'm entirely out to lunch here, since economics isn't my forte, sadly.

[Douglas]

Bernanke's argument is somewhat different in addressing why the Fed should not act to close the current account deficit. I'd doubt that he'd dispute that low national saving will affect the prosperity of Americans in the longer term. Look at the last episode of yawning current account deficits and see how what is now called gross national income fell relative to GDP.

To at least partially address Tanager's earlier post, there are elements of the tax code that are biased against saving, such as mortgage interest relief. Look at the recent CBO report on tax expenditures to see just how stonkingly important that is.

[claude]

Originally Posted by Dr Dave

"I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving--a global saving glut--which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today."

A variation on the "it's different now" philosophy widely espoused before the dot-com stockmarket meltdown?

[Dr Dave]

Originally Posted by claude

A variation on the "it's different now" philosophy widely espoused before the dot-com stockmarket meltdown?

I don't think so. In fact, I expect the new Fed chairman to watch the foreign investment number closely, since he clearly believes it is important. I don't think Bernanke is any kind of faddist. He does think differently about monetary policy that his predecessor, and it is my sincere hope that he is right.

By the way, what with the Alito hearings and all, some Senators apparently never bothered attending Bernanke's confirmation hearings. The esteemed Senator from Viriginia, Mr. Allen, (always good for a laugh) had to be informed by the New York Times that the hearings had taken place last November and that Bernanke was about to take over as Fed chairman. Here's an excerpt:

From The New York Times, Jan 31, 2006:

Wall Street may be intensely interested in just about every word ever uttered by Mr. Bernanke, the former Princeton economist and chairman of the White House Council of Economic Advisers who is President Bush's choice to succeed Alan Greenspan.

But in Washington, he is barely on some people's radar screens. Indeed, here is what Senator George Allen of Virginia, who is considering a bid for the Republican presidential nomination in 2008, said when asked his opinion of the Bernanke nomination.

"For what?"

Told that Mr. Bernanke was up for the Fed chairman's job, Mr. Allen hedged a little, said he had not been focused on it, and wondered aloud when the hearings would be. Told that the Senate Banking Committee hearings had concluded in November, the senator responded: "You mean I missed them all? I paid no attention to them."

-30-

To be fair to poor Senator Allen, it turns out John McCain didn't know Bernanke was about to take the reins, either.

[rollhead]

Originally Posted by LennyH

I can hardly save a dime outside of my 401K. But my wife and I both put away close to the max in our 401Ks so I don't feel guilty if I need to take a loan out of there once in a while. It's always a safety net.

I'll bet a lot of people do the same and that could be contributing to this situation.

Lenny, I would think by most standards this would be considered savings.

In fact, it is probably the best way to save, since you are saving pre-tax dollars.

[sonic1]

What I find disagreeable is the title of the thread: American can't be trusted with their own money. I think much more research would need to be made to determine why (if so) do americans save less money. I know I have been able to save less the past few years, but my life expenses have gone up. I needed a new car (bought a sensible honda), daughter goes to preschool which is expensive here in AZ, traffic is more terrible going to work because of growth in Tucson, therefore more gas used (some new roads would be good but that would involve *gasp* tax increase!)...

Anyway, I buy fewer extraneous things these days, even less jazz music than before. I make more than the average american a year and still have trouble saving money beyond my 401K which is automatic. It isn't because I am irresponsible, but because I AM responsible. I could probably save more money if I chose to use credit cards more, but that wouldn't be very wise now would it?

Anyway, I am annoyed at the assumption that people can't handle their own money. Must I live a spartan life?

[Scott Dolan]

Originally Posted by Jared

I could probably save more money if I chose to use credit cards more, but that wouldn't be very wise now would it?

No, and no.

[sonic1]

Originally Posted by Scott Dolan

No, and no.

That *was* tongue in cheek scotts.

[Scott Dolan]

I realize that, but do you understand how many out there think they really ARE saving money by going that route?

"Oh, but my monthly payment is only $82!"

[sonic1]

Originally Posted by Scott Dolan

I realize that, but do you understand how many out there think they really ARE saving money by going that route?

"Oh, but my monthly payment is only $82!"

Yes. There are many people out there doing that.

But even people who are not, like me, are having trouble saving money. I never let my credit card go above 200 dollars, and always pay it off immediately so as not to accure interest. I don't go out, have hardly bought much music as of late, am paying mostly for basics, and still have trouble saving money.

[Scott Dolan]

Yeah, I'm right there with you. We've been having that same trouble. Only we do spend more than we should. But, the bigger problem is that lately every single thing that could go wrong with our house, has been.

Flooded basement last spring, a/c shits the bed in the middle of summer, had to replace back half of roof, need to replace a/c compressor now..........

Oy.......

That shit really adds up.

[sonic1]

Originally Posted by Scott Dolan

Yeah, I'm right there with you. We've been having that same trouble. Only we do spend more than we should. But, the bigger problem is that lately every single thing that could go wrong with our house, has been.

Flooded basement last spring, a/c shits the bed in the middle of summer, had to replace back half of roof, need to replace a/c compressor now..........

Oy.......

That shit really adds up.

(Crossing my fingers) My house has not had any trouble as of late. No flooding here in my non-basement.

[Scott Dolan]

Our last house was like that. Other than having the bug man come through every so often we never had any problems.

Our place was built in '89, so it's not a huge surprise that these kind of things are starting to crop up.

[sonic1]

Originally Posted by Scott Dolan

Our last house was like that. Other than having the bug man come through every so often we never had any problems.

Our place was built in '89, so it's not a huge surprise that these kind of things are starting to crop up.

Mine was built in 1921. They sure don't make them like they used ta.

[Scott Dolan]

Yeah, but the thing about our place is that everything in it is original. and all the original stuff was incredibly cheap and shitty.