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Credit bubble.
When it goes "pop," be armed.
House rich, money poor...
Thursday February 1, 10:35 am ET
By Martin Crutsinger, AP Economics Writer
Personal Savings Rate for 2006 Tumbles to Negative 1 Percent, the Lowest Level in 74 Years
WASHINGTON (AP)Yahoo-- People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.
The Commerce Department reported Thursday that the savings rate for all of 2006 was a negative 1 percent, meaning that not only did people spend all the money they earned but they also dipped into savings or increased borrowing to finance purchases. The 2006 figure was lower than a negative 0.4 percent in 2005 and was the poorest showing since a negative 1.5 percent savings rate in 1933 during the Depression.
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The Ins ute for Supply Management said its manufacturing index registered 49.3 last month, down from a December reading of 51.4. A reading below 50 indicates that manufacturing activity is contracting rather than expanding.
Meanwhile, the Labor Department reported that the number of newly laid off workers filing claims for unemployment benefits dropped by 20,000 last week to 307,000. That improvement pushed the four-week average for claims to the lowest level in a year, indicating that the labor market remains healthy.
Meanwhile, the Dow is closing at record numbers and Exxon is reporting record profits. It's the two Americas, and the income gap is justing getting bigger. The savings calculation has two steps. First, it calculates disposable income, as the sum of income less taxes. Second, it subtracts all personal outlays, excluding real estate, which is considered an investment. Thus, the savings rate includes contributions to 401Ks and IRAs, but does not include social security contributions, since these are viewed as a tax.
It also does not include capital gains. So if your house or the mutual funds in your IRA increased in value by $50,000, that increases your net worth, but is not considered savings. There's a lot of discussion among economists of what the decline in savings rate means. Some economist attribute it almost entirely to increases in net worth not due to savings, and to demographic changes.
I'd like to read Scott's take on this...
Credit bubble.
When it goes "pop," be armed.
I can't figure out why anyone would think that our current economic situation is sustainable over the long run. Maybe they think that after we've overcome the laws of economics we can get rid of the laws of thermodynamics and get to work on that perpetual motion machine.
You say what you will about economic laws, but leave perpetual motion out of this sir.
Grow your assets, mother s.
Have your assets cornered the catnip market?
People should spend less money in unnecessary items such as plasmas, ipods and the likes and the savings rate would go up. Easy fix.
Unforumately, America lives beyond its meany running a huge national deficit. Why wouldn't Americans run huge pesonal deficits simply not to be outshun by their neighbors (i.e., if my neighbor has a big car, I have to have one too)?
Dan, you fool, Exxon's profits and the Dow Jones have nothing to do with the savings rate. You are intelectually dishonest (as always).
I guess the government should force us to keep money in our bank accounts so Nbadan can stop making posts like this.
Your SS money was taken in Iraq. You were robbed, but you too guch to know it.
Our central planners at the Fed are responsible for the low savings rate in this country.
Somewhat, but it comes down to people simply buying crap they dont need. If you cant afford a Mercedes, buy a Honda.
^ That's true but the Fed and the government could encourage greater saving in America if they wanted to. But American consumer spending is the engine of the global economy, so they haven't.
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