Tuesday, Aug 26, 2008
Slowly Americans starting to save, turning around a 20 year trend
Seeking Alpha: The Great Consumer Crash of 2009
A long comprehensive article on the debt situation of the average american. More debt onto credit cards now that home equity withdrawal has dried up. I expect the UK to be looking like this very soon.
"According to the Federal Reserve, 40% of American families spend more than they earn. The reversal of this trend will be necessary but traumatic. It has already begun, with the savings rate increasing to 2.6% in early 2008. David Rosenberg, the brilliant economist from Merrill Lynch, describes what has happened and what is to come: "This is an epic event; we're talking about the end of a 20-year secular credit expansion that went absolutely parabolic from 2001-2007. Before the US economy can truly begin to expand again, the savings rate must rise to pre-bubble levels of 8pc."
4 Comments
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1. fubar said...
Nice touch from the article;
How Did I Get Here
And you may find yourself behind the wheel of a large automobile
And you may find yourself in a beautiful house, with a beautiful wife
And you may ask yourself-Well...How did I get here?
And you may ask yourself
Where is that large automobile?
And you may tell yourself
This is not my beautiful house!
And you may tell yourself
This is not my beautiful wife!
-Talking Heads, David Byrne lyrics to Once in a Lifetime
2. harold said...
Why save $s in the US - interest rates + inflation = negative growth.
3. uncle tom said...
The UK's equity withdrawal problem, after adjusting for population difference, is very similar to that in the US.
The way this injects new, but unsustainable cash into the economy should not be underestimated. Because one man's excess spending is another's income, the effect of MEW drying up is going to be immense, and has so far been barely felt.
4. landofconfusion said...
@ 09:16AM uncle tom said...
I agree completely. Much of the 'growth' that we've had over the last few years has been because of the availability of credit. Take that away and all you are left with is recession.