People weren't supposed to be saving this much money

[mickeyd]

If you are still saving rather than spending you are responsible for a savings glut. Now cut it out and break out the CC!

Deutsche Bank on how an economist might think zero-interest-rate policies might pass through to consumers (emphasis ours):

If households save to accumulate a target level of wealth, either to live off in retirement or to bequeath, then an increase in wealth (because say equity markets rise) will see a lower required savings rate; and vice versa with declines in wealth raising the savings rate. In turn, a rise in the savings rate, or what is the same thing a fall in the consumption rate, will lower aggregate demand in the economy. This dependence of the savings rate on wealth is widely recognized, including by various members of the FOMC.

This is sort of the "savings glut" idea that people like former Fed Chairman Ben Bernanke have talked about in the years since the financial crisis.
​

http://finance.yahoo.com/news/people-we ... 50809.html

 

[Animorph]

I'm not sure there are enough households that are accumulating to a "target level of wealth". We know how rare that seems to be.

 

[Totoro]

For the US the shown charts are pretty meaningless. If I recall correctly half of us households have zero or negative net worth.

In addition, lower yields mean poorer future returns and thus higher required savings. Not to mention pension funds who have to invest in certain ratios (bonds) and banks that still need to strengthen their balance sheets (i.e. lend to people with lower risk profiles).

Not sure which economists they were asking but if 'they' think lowering interest rates increases consumer spending across the board that's very simplistic thinking indeed.

If anything simplistic does hold up it's that good businesses will have higher profit margins and bad businesses will linger along for much longer. Since they pay lower interest on borrowings and all. Also taking high risks with balance sheets are tolerated much more (looking at Altice here for example).

 

[rayinpenn]

Your kidding right?
Yesterday on the drive home I heard 30% of retirees with be fully dependent on SS alone.

Did you ever Google 'average wealth at retirement ?' the average net worth is $170k
(That means 50% have less) Keep in mind that's net worth not investible assets...
Have to wonder if you back out the casa - what does the average 65 earn/live on in a year?

https://infogr.am/household_net_worth_by_age

Savings? Not so much in America



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[gauss]

Ben Bernanke mentions the "savings glut" relative to good investment opportunities in this economy as being the fundamental cause for low interest rates in his recent Diane Rehm Show interview of Oct 6.
Ben Bernanke: "The Courage to Act" - The Diane Rehm Show

 

[Andre1969]

I always get confused by these types of articles because, in my mind, if it's money put aside for the future, it's "saved"...whether it goes into a checking account, savings account, mutual fund, stock, IRA, 401k, etc...

 

[Marco]

It's always the consumers fault.....

 

[MRG]

Maybe the authors should talk.

http://www.early-retirement.org/forums/showthread.php?t=78973

 

[dallas27]

Your kidding right?
Yesterday on the drive home I heard 30% of retirees with be fully dependent on SS alone.

Did you ever Google 'average wealth at retirement ?' the average net worth is $170k
(That means 50% have less) Keep in mind that's net worth not investible assets...
Have to wonder if you back out the casa - what does the average 65 earn/live on in a year?

https://infogr.am/household_net_worth_by_age

Savings? Not so much in America



Sent from my iPad using Early Retirement Forum.

No, it doesn't mean 50% have less. Yes that is important to understand.


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[dallas27]

I always get confused by these types of articles because, in my mind, if it's money put aside for the future, it's "saved"...whether it goes into a checking account, savings account, mutual fund, stock, IRA, 401k, etc...

All investment, bank accounts, etc. are savings from an economics/finance viewpoint.


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[mickeyd]

My thinking about savings is that whatever I do not spend now, I will spend later. What total return I get on that savings over time is a bonus. Quite often the "bonus" ends up being the bigger part of the savings/investment.

Einstein thought that this was a wonder of the world. I tend to agree with Albert on this issue.

 

[Totoro]

As someone once said:

"The greatest shortcoming of the human race is our inability to understand the exponential function."

I'm extra careful around any % sign.

 

[ChiliPepr]

Did you ever Google 'average wealth at retirement ?' the average net worth is $170k
(That means 50% have less) Keep in mind that's net worth not investible assets...

No, it doesn't mean 50% have less. Yes that is important to understand.

+1

If I have a million dollars saved and nine other people don't have anything else saved... the "average" savings is 100k... but 90% have less than that.

 

[ChiliPepr]

As someone once said:

"The greatest shortcoming of the human race is our inability to understand the exponential function."

I'm extra careful around any % sign.

and the ^ sign.....

 

[FI by 2024]

No, it doesn't mean 50% have less. Yes that is important to understand.


Sent from my iPhone using Early Retirement Forum

+2!


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[rayinpenn]

Thanks Your right but sadly it makes my 50% seem optimistic.....
We're doomed.


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[gauss]

and the ^ sign.....

Okay - I'll play. How about the ** 'sign' -- anybody?

Hint (col 6 = continuation....)