"The personal saving rate in the United States has been declining for years. In the 1970s and early 1980s, it frequently climbed above ten percent. More recently, it has hovered around zero. But the general trend is downward. Americans are not saving."
Again, this is an issue that really needs to be resolved... Sometime later, though. In the mid-Aughties, if we had higher savings and less borrowing, the Housing Bubble would have gone *pop* instead of *KABLAM!*
ReplyDeleteBut now, more than ever, we need people to keep spending -- because one man's spending is another man's income. If everyone starts spending less, everyone starts earning less.
One of the reasons savings was so low over the last few decades is that borrowing was so cheap. It's an easy supply vs. demand relationship. If the real interest rate is kept super low, a la Greenspan-style, then why the hell would I save my money if I'm only getting a 1% return on it? If it's mega high, we no-doubt are going to start siphoning away our paychecks into savings instruments.
Hopefully, after we've escaped the 2008 Recession's trough, the Fed will start easing that interest rate back up.
I hear you on the interest rate. Personally I've watched my "high-interest" saving account go from 3.9% to .8%. Ouch. BUT I keep putting my money in the bank to save for rainy days/emergency funds. That flat panel tv I want just isnt practical right now. That new Gibson Les Paul would be great but that $3000 I spend on it can pay my rent for three months.
ReplyDeleteTo say that my spending is another mans income is correct (that's why I do most shopping on eBay) but I'm not shopping much at stores because of Cost-Plus Pricing.
What I really like (or dislike in this case) is that debt graph. And to think, some of this debt is at 25, 28, 29% interest!