How's your bomb shelter doing?

[ziggy29]

It's not just an emergency fund, it's a bomb shelter:

Americans start saving again _ when the economy needs them to spend -- chicagotribune.com

Some experts say consumers have been so shaken by how fast their wealth has shrunk, so burned by credit card debt, that they might not resume their robust spending for years, if ever.

"People are not saving; they are building financial bomb shelters," said Mark Stevens, who runs a management consulting firm, MSCO, in Rye Brook, N.Y.

 

[Architect]

indeed. Anybody who thought in years past (not me, but many WS wonks) that the 25 year consumer overspending was a sustainable trend was a fool.

 

[Walt34]

What a surprise that some people are learning that The Piper Will Be Paid.

 

[ziggy29]

The unfortunate thing is that this economy has needed to go on a "spending diet" for a while back into fiscal sustainability... but it didn't need for the shift to happen this drastically and violently.

The "velocity of money" needed to slow down.... but not to the point of running into a brick wall and crashing.

 

[Bestwifeever]

Damned if we do (save), damned if we don't....

In early October we were in Europe and America were getting lambasted by the people we were with because they said our savings rate was the lowest in the entire universe.

 

[dex]

Some experts say consumers have been so shaken by how fast their wealth has shrunk, so burned by credit card debt, that they might not resume their robust spending for years, if ever.

I doubt it.
Go back and read the news articles after 9/11 and how that was going to change US population's behaviors. It didn't.

Yes there will be some decline in spending. This will result in pent up demand. Then there will be "relief" spending when the economy picks up or people believe they will be OK i.e. not laid off.

A better predictor of people's spending patterns is age - people spend less as they get older. So a society with an aging population will spend less. The USA's population is getting older but not at a rate to be concerned about now.

 

[CuppaJoe]

So saving is wise only when it’s a contrarian thing that just a few actually practice?

Would a 2.9% savings rate get you to FI? Not I.

I recently made of list of places where I could either increase income or reduce spending, it is 19% of my allotted RE budget. If the entire baby boomer generation does this, whoa, it’s down the rabbit hole we go until we see a note, “eat me”?

...he knows of people who drive a BMW or Mercedes and eat macaroni and cheese for dinner several nights a week.

I crave mac and cheese but don’t allow myself to eat it! If I gave in to that, it might help the medical industry.

 

[ziggy29]

I doubt it.
Go back and read the news articles after 9/11 and how that was going to change US population's behaviors. It didn't.

Yes there will be some decline in spending. This will result in pent up demand. Then there will be "relief" spending when the economy picks up or people believe they will be OK i.e. not laid off.

My gut feeling is that we're not going to become the second coming of the Depression generation, but I do think there will be enough people who have this memory burned into their psyche that the truly free-spending days won't return for some.

 

[FinanceDude]

My gut feeling is that we're not going to become the second coming of the Depression generation, but I do think there will be enough people who have this memory burned into their psyche that the truly free-spending days won't return for some.

I hope the free-wheeling days never come back. Credit cards didn't exist really until 1965. All it took was about 40 years to bankrupt the richest nation on earth...........

 

[CuppaJoe]

I hope the free-wheeling days never come back. Credit cards didn't exist really until 1965. All it took was about 40 years to bankrupt the richest nation on earth...........

Mom called them department store "Charge plates" in the '50s. No visa or MC back then? Interesting history.

 

[tuixiu]

I remember when lay-away was the big thing for crap you couldnt afford

 

[ziggy29]

I remember when lay-away was the big thing for crap you couldnt afford

And it's no coincidence, perhaps, that it's making a bit of a comeback.

 

[MichaelB]

I doubt it.
Go back and read the news articles after 9/11 and how that was going to change US population's behaviors. It didn't.

Yes there will be some decline in spending. This will result in pent up demand. Then there will be "relief" spending when the economy picks up or people believe they will be OK i.e. not laid off.

A better predictor of people's spending patterns is age - people spend less as they get older. So a society with an aging population will spend less. The USA's population is getting older but not at a rate to be concerned about now.

I agree with Dex. Spending is in the fabric of our culture. Spending, buying, possessing are important ways to measure self-worth. They will not be easily changed.

 

[Grep]

The Horror!

With my life-long savings rate of roughly 50% compared to the average, horrifically-high 2.9%, I'm more evil than 17 average folk put together.

Because of my lack of patriotism, somewhere between 25-50 people will have to go to the malls and spend more "robustly" to save this economy.

Holy cow, I'm not just building a 2.9% "bomb shelter," I'm hunkering down in a personal Cheyenne Mountain Complex!

 

[snodog]

If you have alot of debt you should be paying it down and not buying anything.

The trouble comes IMO when even those with savings who have lived frugally and have little debt are even too afraid to spend.

If you do have the money now is a great time to buy anything. Its all on sale.

 

[FinanceDude]

If millions of folks start saving, some industries will do well. One would think banks and credit unions will start paying hefty dividends once all the toxic junk works its way through.........

However, NOT a good time to be a retailer, unless you're WalMart......even Target is struggling..........

 

[ziggy29]

If millions of folks start saving, some industries will do well. One would think banks and credit unions will start paying hefty dividends once all the toxic junk works its way through.........

How so? If people are saving more, supply of savings rises...seems like it would result in craptastic rates for savings.

 

[unclemick]

Well buck up folks - still trying to change my ways - now that it's not the 90's anymore.

I'm going to make a real effort to spend more than I make(from investments) - cause at 65, not getting any younger and 16th year of ER like that old wide receiver hearing footsteps - there is this vicious rumor that you can't take it with you.

Now that's silly right? Maybe I should send some ahead just to make sure?

I'm sure some forum member has the address.



heh heh heh -

 

[Grep]

I've always felt incensed at being labeled a "consumer." My belief has always been that I'm a net contributor to society by a wide margin.

I don't need to tell any of you that spending isn't everything. Anyone who views us as mere "consumers" has an exceedingly narrow and insulting view of the human race. It's critically-important that investments in the future of our society are made.

 

[Gardnr]

It's critically-important that investments in the future of our society are made.

Amen to that. We need to find a way to be net producers again, not just consumers and churners of stuff and services. New energy sources are the future of a sustainable planet. I sure hope we make some significant strides very soon. There are certainly promising developments around so I'm optimistic.

 

[Khan]

Amen to that. We need to find a way to be net producers again, not just consumers and churners of stuff and services. New energy sources are the future of a sustainable planet. I sure hope we make some significant strides very soon. There are certainly promising developments around so I'm optimistic.

Years ago, the family (or individual) was a unit of production, not a unit of consumption. Maybe that needs to be turned back a bit.

 

[FinanceDude]

How so? If people are saving more, supply of savings rises...seems like it would result in craptastic rates for savings.

It will, but that does not mean folks won't buy CDs and/or keep too much money in the bank.........

 

[shotgunner]

In the long run this recession would have to run much longer and deeper to become a significant emotional event permanently changing the behavior of millions of people. The Depression with the stock market crash (89% drop), 25% unemployment, bank runs, bank failures with no FDIC lasted for more than a decade followed by 4 years of WWII with it' scrap metal drives, gas rationing, tire rationing, food rationing, victory gardens. The depth and breadth of the Great Depression and WWII was a terribly long lasting hardship that changed people psychologically for the rest of their lives.

I don't see what has happened in 2008 leaving people hungry, homeless and more importantly feeling truly HOPELESS as people did from 1929 to 1945. This is going to have to get a lot worse and go for many many years before our collective desires to own big houses, sports cars, luxury SUV's, Jacuzzi's, motorcycles, vacations etc. goes away.

I am going to bet this doesn't get bad enough to change our collective behavior to spend and consume forever.

 

[OAG]

Yes, it would have been "just as bad", but we have some "really" good folks in "our" Congress that are going to make this time "a lot different". Just watch them over the next couple of years.

 

[Lusitan]

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<---------------------- My bomb shelter is doing fine