Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
US Personal Savings Now Negative?
Old 11-04-2005, 10:58 PM   #1
Thinks s/he gets paid by the post
 
Join Date: Mar 2004
Posts: 1,318
US Personal Savings Now Negative?

Did anybody catch this in the news this week that U.S. personal savings have now gone negative? I guess we should have seen it coming.

At the same time, yesterday's WSJ says the world is awash in capital (savings), that US corporations are saving more than ever (by generating huge profits), and that almost everyone else in the world is saving a lot, topped by China where the national average for personal savigns is a whopping 25%.

One other tidbit -- all this capital keeps interest rates low. That makes credit cheap. That means investors can borrow money easily to fund leveraged plays. The credit acts to create an even greater supply of capital, (keeping interest rates low and credit cheap) which is odd- usually in economics things self-correct. I guess they will self-correct, but I just haven't figured out when or how.

Not sure what it all means to us as investors and FIREees, but I find it interesting, and suspect it will be at the heart of the next big 'thing' to affect the markets...

__________________

__________________
ER for 10 years; living off 4.3% of savings (and a few book royalties ;-)
ESRBob is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: US Personal Savings Now Negative?
Old 11-04-2005, 11:03 PM   #2
Full time employment: Posting here.
 
Join Date: Aug 2004
Posts: 909
Send a message via ICQ to Marshac Send a message via AIM to Marshac Send a message via Yahoo to Marshac
Re: US Personal Savings Now Negative?

Personal savings has been in the red for several months now- Any guesses how the average person will deal with rising credit card min payments?
__________________

__________________
Marshac is offline   Reply With Quote
Re: US Personal Savings Now Negative?
Old 11-04-2005, 11:19 PM   #3
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: US Personal Savings Now Negative?

Well, what incentive is there to save your money when the banks are offering you a negative real savings rate? You're better off spending.

In any case, corporate savings is very high, and foreign savers are buying our debt and assets. Times have changed, but it seems to all net out for now.
__________________
wabmester is offline   Reply With Quote
Re: US Personal Savings Now Negative?
Old 11-05-2005, 02:49 AM   #4
Full time employment: Posting here.
 
Join Date: Nov 2002
Posts: 768
Re: US Personal Savings Now Negative?

The original idea behind constant inflation was that workers would be tricked into thinking they were getting richer, and so would spend more (save less). The rising wages made them feel richer, and the rising prices made them buy quickly before prices went up again. It was billed as a means of getting the nation out of the Great Depression.

The politicians went overboard on the inflation thing though, and most workers no longer save at all. A bit of deflation now and then would encourage saving, but helicopter Ben is still worried about the Great Depression coming back.
__________________
Michael is offline   Reply With Quote
Re: US Personal Savings Now Negative?
Old 11-05-2005, 12:00 PM   #5
Thinks s/he gets paid by the post
greg's Avatar
 
Join Date: Jun 2005
Posts: 1,071
Re: US Personal Savings Now Negative?

Michael: I found this 'doom and gloom' report. You might be interested. Nice little history lesson too:

http://www.kitco.com/ind/Puplava/oct312005.html

--Greg
__________________
Compounding: Never forget! Never not remember!
greg is offline   Reply With Quote
Re: US Personal Savings Now Negative?
Old 11-05-2005, 03:27 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Re: US Personal Savings Now Negative?

I posted this calculation in a different thread

Quote:
. . . The question I wanted to answer was, "what % of Would Be Retiree's gross income does he need to save to achieve a 4% withdrawal rate assuming he does not reduce spending after retirement?"* (e.g. if he makes $50K and saves $20K, he will still spend $30K in retirement).* Assuming he begins saving at an age of 30,

To retire at 65 he needs to save 21% of his gross income
To retire at 55 he needs to save 34% of his gross income
To retire at 45 he needs to save 52% of his gross income
Forget about retiring early.* People need to save a significant chunk of change to consider retiring at all.* Especially now that cola-adjusted defined benefit plans and social security are going the way of the dinosaur.*

In view of a "negative savings rate" I don't think we have to worry about aging boomers dropping out of the work force.* It is more likely that people are going to have to keep work until they drop dead.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Re: US Personal Savings Now Negative?
Old 11-05-2005, 03:57 PM   #7
Full time employment: Posting here.
 
Join Date: Nov 2002
Posts: 768
Re: US Personal Savings Now Negative?

Thanks for the article Greg. Keep those inflation hedges handy.
__________________
Michael is offline   Reply With Quote
Re: US Personal Savings Now Negative?
Old 11-05-2005, 04:10 PM   #8
Thinks s/he gets paid by the post
Tadpole's Avatar
 
Join Date: Jul 2004
Posts: 1,170
Re: US Personal Savings Now Negative?

Quote:
Originally Posted by wab
Well, what incentive is there to save your money when the banks are offering you a negative real savings rate?* *You're better off spending.

In any case, corporate savings is very high, and foreign savers are buying our debt and assets.* *Times have changed, but it seems to all net out for now.
I found this paragraph in the linked article interesting - BofA doesn't want its customers:

Lately, though, questions about the MBNA deal have dovetailed with more pressing concerns about Bank of America's ability to manage its bond trading and loan portfolio.

In fact, the financial giant's enormous size has prevented it from raising its standard savings and checking account rates. As a result of last year's $47 billion purchase of FleetBoston Financial Corp., Bank of America's total deposits have grown close to the 10 percent national limit imposed by regulators. To avoid going over the limit, the bank has kept interest rates lower than its competitors, prompting some customers to take their business elsewhere.
http://www.chicagotribune.com/busine...,6336701.story
__________________

__________________
Tadpole is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
2006 personal savings drop to 74-yr. low ScaredtoQuit FIRE and Money 98 02-10-2007 08:27 PM
Negative Savings retire@40 FIRE and Money 17 12-19-2006 07:47 PM
The Declining Dollar Erodes Personal Savings camberiu FIRE and Money 45 05-17-2006 08:05 AM
Savings Rate - Negative or Not? REWahoo FIRE and Money 18 03-10-2006 07:26 PM
EE bonds to ??? cute fuzzy bunny FIRE and Money 1 12-24-2003 01:33 PM

 

 
All times are GMT -6. The time now is 12:36 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.