The Global Savings Glut
- Thread starter charrison
- Start date
what happens when our creditors stop borrowing because they realise that we will never pay them back?
The propension to consume of the average american is indeed so much bigger than the average european guy. One of the first things that really shocked me when i moved to the US for the first time was the (to me) suicidal financial lifestyle of people. The confidence that many american have living with debts is simply culturally unacceptable to most europeans. In a city like New York even people with very well paid jobs have in many cases almost no savings, as they use their income to support their super expensive lifestyle, no matter how big the income can be.
In almost no other city in the world you can find 30.000$ rents, for the simple reason that an european who can afford such a rent would be putting the same money in a mortgage. Many newyorkers pay those rents because they have faith in the idea that their next year income and bonuses are going to be even higher. These kind of things are expecially striking when considering we are speaking of real estate, a field usually considered a defensive investment. The concept itself of refinancing real estate assets doesn't exist in Europe, where most people are very unconfortable with the idea of having debts on the place where they live, even because the real estate values in Europe are insanely high if compared to the US.
Same differences to be found in the portfolio management strategies, with americans more exposed in the private equities markets Vs. europeans more in the bonds markets.
In the end my perception is that americans have an always optimistic view of the future compared with a much more suspicious and pessimistic attitude of the europeans. As a result many europeans think americans have a childish and naive relation with money, and many americans think europeans are too conservative and financially coward.
In the end it's just a different culture and view on life, europeans need to feel sacure about their future more than enjoy high consumes today.
Of course the result is also that the US can enjoy very steep economy growths as well as suffer very steep economy slides.
In almost no other city in the world you can find 30.000$ rents, for the simple reason that an european who can afford such a rent would be putting the same money in a mortgage. Many newyorkers pay those rents because they have faith in the idea that their next year income and bonuses are going to be even higher. These kind of things are expecially striking when considering we are speaking of real estate, a field usually considered a defensive investment. The concept itself of refinancing real estate assets doesn't exist in Europe, where most people are very unconfortable with the idea of having debts on the place where they live, even because the real estate values in Europe are insanely high if compared to the US.
Same differences to be found in the portfolio management strategies, with americans more exposed in the private equities markets Vs. europeans more in the bonds markets.
In the end my perception is that americans have an always optimistic view of the future compared with a much more suspicious and pessimistic attitude of the europeans. As a result many europeans think americans have a childish and naive relation with money, and many americans think europeans are too conservative and financially coward.
In the end it's just a different culture and view on life, europeans need to feel sacure about their future more than enjoy high consumes today.
Of course the result is also that the US can enjoy very steep economy growths as well as suffer very steep economy slides.
One thing I think these economist forget is the difference in social networks in the US and the rest of the 1st world.
If you are in the US and you are a lower income person, it makes very little sense to save. The gov only helps the extremely poor, and a large medical can easily wipe out a lifetime of savings. If you need tuition, all your assets or used in calculating the need, which hurts those who save.
I also think that business leaders in the US grew up on marketing consumer crap, and leaders elsewhere learned to impliment what ever policy it took to get a share of the US market.
Those people and ideas are entrenched, and are hard to change.
If you are in the US and you are a lower income person, it makes very little sense to save. The gov only helps the extremely poor, and a large medical can easily wipe out a lifetime of savings. If you need tuition, all your assets or used in calculating the need, which hurts those who save.
I also think that business leaders in the US grew up on marketing consumer crap, and leaders elsewhere learned to impliment what ever policy it took to get a share of the US market.
Those people and ideas are entrenched, and are hard to change.
Not exactly correct, ntdz. While debts from WW2 and previous debts were paid, or at least paid down, current debts are merely rolled over into new debt. The only thing being paid is interest, lots of it. Kinda like using the Visa card to pay off the American Express, with no plan to ever actually pay off anything... Debt maintenance is currently the third largest non-SS expenditure, behind the military and all of HHS.
The only plan right now is to borrow more money, cut taxes for the wealthy, convert overvalued dollars into international assets, raise taxes for the middle class, welch on SS, leave Joe and Joan Sixpack behind to stave off the wolves... It's been the plan for 25 years, the true goal of Supply-side economic theory.
In 1980, the top 1% took in 9% of all US income, which is 19% today. In 1970, the top .01% took in 1% of all income in the US- today, that same .01% takes in 5%. Their total tax rate has fallen dramatically, while that of the rest has increased, and will continue to do so as mounting debt crimps our borrowing style... the whole scam can't be carried w/o massive deficits that will jump up to bite us in the ass somewhere over the next several years... Get ready to join the Third World. You've already got the headset, all you need now is the reality to go along with it...
The only plan right now is to borrow more money, cut taxes for the wealthy, convert overvalued dollars into international assets, raise taxes for the middle class, welch on SS, leave Joe and Joan Sixpack behind to stave off the wolves... It's been the plan for 25 years, the true goal of Supply-side economic theory.
In 1980, the top 1% took in 9% of all US income, which is 19% today. In 1970, the top .01% took in 1% of all income in the US- today, that same .01% takes in 5%. Their total tax rate has fallen dramatically, while that of the rest has increased, and will continue to do so as mounting debt crimps our borrowing style... the whole scam can't be carried w/o massive deficits that will jump up to bite us in the ass somewhere over the next several years... Get ready to join the Third World. You've already got the headset, all you need now is the reality to go along with it...
in the past yes, but the debt has never been this huge, and if we continue (and we will) borrowing we will come to a point where all the tax money goes to pay the debt interest and we have no money for the military or any civil projects like roads, wake up, if bush were such a compassionate conservative he would have vetoed at least 1 bill in the last 5 years, but with you red majority you guys just push through pork after pork after pork, even though i'm a democrat, i would give anything to have a moderate republican take over the country from this pro corporate clown
answer this, how does it help the middle class by giving billions of dollars to corporations, THAT DO NOT TRICKLE IT DOWN TO THE LITTLE GUY, wage increases have been stagnant, inflation in the last year has outpaced what little wage growth we have seen, bankruptcies are at a high, medical insurance is almost unaffordable to lower income americans unless the company you work for pays for it, and we have 2/3 of our government standing in line to see who can be next up for the corporate money circle jerk, and i'm not just talking about the reds, some of the blues are on the take too, do i need to continue?
on top of this we have the ruling party that would rather tow the party line than engage in a real thought process about what the right thing to do is.
Hayabusa Rider
Admin Emeritus & Elite Member
- Jan 26, 2000
- 50,879
- 4,268
- 126
What this sounds like is that the Europeans are being blamed for being good stewards of their funds, or it's their fault for not being as materialistic as we.
If true, this hardly seems to give us much to brag about as a people.
If true, this hardly seems to give us much to brag about as a people.
That article just dances around the real issues.
Tax breaks for the wealthy and the cost of the "war" is causing inflation, which makes the dollar fall even further. Who wants to save money during times of inflation, especially when the stock market flounders and the interest rates are low?
With the dollar falling and the stock market stagnant forgein investors aren't going to invest here.
The large corproations continue to out source jobs and invest money in other countries. Many US investors are investing in mutual funds that specialize in investing in countries with cheap labor.
The interest rate card has ben played and the stock market still can't make any substainable gains. Private individuals (who were largely responsibe for the rise in the stock market) are getting thier money out of paper and into something real.
He says that the Chinese are saving more then people in the US? How can people in countries that are only making a $1 an hour save more then us??
And this guy is still saying we have a 3 1/2 year old economic recovery?? He needs to take his rose colored glasses off.
America needs a spouse. My wife applies a "sweetheart tax" that's approximately 85% of my take home. So instead of a Lotus, ridiculous-sized plasma TV, and a mistress . . . I've got a used Acura, meager CRTs, and pop-up laden pr0n.
A more apropos comparison is the "glutton" from Monty Python. America will "consume" to the point of self-destruction . . . of course, that assumes that others will continue to feed the beast.
Debt and Deficits
Decades ago, debt was served up in small doses, like one of those shapely little 7-ounce bottles of Coca-Cola. A home mortgage (with a full 20% down payment) was fine. Maybe you took out a small "paycheck" loan for a diamond for your fiancée. But that was about it.
As hard as it is for those under 28 years of age to believe, people actually used to save first, and then pay cash for things, including big-ticket purchases such as a new car, a refrigerator and other durable goods. Student loans were virtually non-existent. If you didn't have the funds to pay for tuition, you got a job and worked your way through college - what a concept! The thought of buying a new suit or dress, the weekly groceries or a vacation trip "on credit" was unthinkable.
Today, debt is served up as if Homer Simpson were lying under a running soda dispenser with his mouth open: "ahgghghghghg, aghghghghg, aghghgghgh". Today, consumers go into debt for anything and everything they can get their hands on. A wallet-full of affinity credit cards is a necessity. Second and third mortgages are de rigueur. A zero percent, 7-year SUV loan is the only way to drive. (Go ahead, pull out that alumni credit card for the $100 fill-up tab.)
Yep, back in the "good old days," a little bit of brown sugar-water was a good thing, Today, 7-11 will gladly accept your 23.9% APR credit card to buy that $1.39, 64-ounce Super-Sized Big Gulp.
We discussed the looming debt and deficit crises in detail in our January report, and things have only gotten worse since then.
Here are a few more recent data-bits on the size and scope of "the problem":
In the last 30 years, household debt as a percentage of personal income has doubled from 60% to 120%.
Total household debt is now $8.2 trillion, over $29,000 for every man, woman, and child in America.
Total US credit market debt is approaching 350% of GDP, twice the level of October 1929.
The personal savings rate of Americans is next to non-existent, a meager 1.0% of income in January. By comparison, the typical poor Chinese peasant saves an estimated 25% of his meager income. What's wrong with this picture?
Link
Interesting stuff.
The only debt I've incurred were a small student loan and a mortgage which I paid off in 12 yrs.
Decades ago, debt was served up in small doses, like one of those shapely little 7-ounce bottles of Coca-Cola. A home mortgage (with a full 20% down payment) was fine. Maybe you took out a small "paycheck" loan for a diamond for your fiancée. But that was about it.
As hard as it is for those under 28 years of age to believe, people actually used to save first, and then pay cash for things, including big-ticket purchases such as a new car, a refrigerator and other durable goods. Student loans were virtually non-existent. If you didn't have the funds to pay for tuition, you got a job and worked your way through college - what a concept! The thought of buying a new suit or dress, the weekly groceries or a vacation trip "on credit" was unthinkable.
Today, debt is served up as if Homer Simpson were lying under a running soda dispenser with his mouth open: "ahgghghghghg, aghghghghg, aghghgghgh". Today, consumers go into debt for anything and everything they can get their hands on. A wallet-full of affinity credit cards is a necessity. Second and third mortgages are de rigueur. A zero percent, 7-year SUV loan is the only way to drive. (Go ahead, pull out that alumni credit card for the $100 fill-up tab.)
Yep, back in the "good old days," a little bit of brown sugar-water was a good thing, Today, 7-11 will gladly accept your 23.9% APR credit card to buy that $1.39, 64-ounce Super-Sized Big Gulp.
We discussed the looming debt and deficit crises in detail in our January report, and things have only gotten worse since then.
Here are a few more recent data-bits on the size and scope of "the problem":
In the last 30 years, household debt as a percentage of personal income has doubled from 60% to 120%.
Total household debt is now $8.2 trillion, over $29,000 for every man, woman, and child in America.
Total US credit market debt is approaching 350% of GDP, twice the level of October 1929.
The personal savings rate of Americans is next to non-existent, a meager 1.0% of income in January. By comparison, the typical poor Chinese peasant saves an estimated 25% of his meager income. What's wrong with this picture?
Link
Interesting stuff.
The only debt I've incurred were a small student loan and a mortgage which I paid off in 12 yrs.
sandorski
No Lifer
- Oct 10, 1999
- 70,791
- 6,350
- 126
"I think I'm gonna throw up", hehe love that scene.
Agree totally with Winston, that article seems to totally miss the point and blame others for issues that lay at the feet of the US/Americans(Canadians also, but less so). It's like the Author believes the RoW is responsible for bailing the US out of it's Home Made hole. Another example of Capitalism run amock, IMO, and why Mixed Economies work better.
My late Grandfather emigrated from Germany in 1928. I remember hearing him complaining about his sons penchant for buying all kinds of crap on Credit, numerous times. I respected his opinion because not only was he trained as a Banker in Germany, but he managed to go from having absolutely nothing when he arrived in Canada to having a very comfortable retirement. He did it all using nothing but Hard Work, Cash and from appreciation of Property(Farmed for most of his life, retired to a nice house in the City).
American middle class, borrowing its way to the gutter
I'm always schocked when I see the "How much cc debt do you have" threads in OT
some of the people in there are virtually broke and the next week they start a thread about their new car
I'm always schocked when I see the "How much cc debt do you have" threads in OT
some of the people in there are virtually broke and the next week they start a thread about their new car
StageLeft
No Lifer
- Sep 29, 2000
- 70,150
- 5
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America is nothing special at all, except that it's better at consuming than everybody else. All these other countries that chastize it for its consumerism are trying to do the same thing, but they are not as good at it. As countries become more wealthy and industralized they follow the same course. It's not a problem with America; it's a problem with humankind.
Please, El Fenix-
http://www.rationalrevolution.net/articles/american_income_taxation.htm
http://www.taxfoundation.org/prtopincome.html
http://www.nytimes.com/2004/02/01/books...en=4ea89edc5df4eee8&ei=5070&oref=login
http://www.irs.gov/pub/irs-soi/00in400h.pdf
Even the usual statistics can be extremely deceptive. The truly wealthy, the top .01%, have seen explosive gains in income and radical reductions in tax rates. Basically, they have the ability to hide in the top 1%... While the top 1% federal income tax rate dropped from 34% to 27%, the top 400 paid only 23% at the end of the same period... the top .01% of national income rose from 1% in 1970 to 5% today...
This was before the preponderance of the Bush taxcuts took effect, which heavily favor the wealthy. The situation is even more skewed today.
http://www.rationalrevolution.net/articles/american_income_taxation.htm
http://www.taxfoundation.org/prtopincome.html
http://www.nytimes.com/2004/02/01/books...en=4ea89edc5df4eee8&ei=5070&oref=login
http://www.irs.gov/pub/irs-soi/00in400h.pdf
Even the usual statistics can be extremely deceptive. The truly wealthy, the top .01%, have seen explosive gains in income and radical reductions in tax rates. Basically, they have the ability to hide in the top 1%... While the top 1% federal income tax rate dropped from 34% to 27%, the top 400 paid only 23% at the end of the same period... the top .01% of national income rose from 1% in 1970 to 5% today...
This was before the preponderance of the Bush taxcuts took effect, which heavily favor the wealthy. The situation is even more skewed today.
StageLeft
No Lifer
- Sep 29, 2000
- 70,150
- 5
- 0
Referring to taxcuts as favouring the wealthy is a bit of a misnomer, since taxes have always grossly disfavoured the wealthy. Now they just disfavour them less. These people are still carrying the weight of the rest of us, and without them our tax income would be grossly inadequate. The poor like to whine about the rich getting tax cuts, but put a flat tax in at the % required to keep tax revenues the same and see who's crying then.
my parents thought i was nuts when i didn't want a credit card. How am I going to get a good crdit rating so i can get loans for a car or whatever... they completely dismissed the idea of saving up for something like that or just not buying it.
of course they also get an overwhelmingly disproportionate amount of the benefits from our civilization as well. Perhaps they owe the rest of us a little for their good fortune.
Stunt
Diamond Member
- Jul 17, 2002
- 9,717
- 2
- 0
Mike, you ever expect to ever own a house without taking out a mortgage?!
With skyrocketing housing costs, I don't know how you will afford to live in the city containing your job.
I guess you can rent, but at least people whoput money down on a house have property at the end of the payment.
Although i do agree with the credit card view. At this point in my life i only have a card for emergencies, the rest goes debit, i hate using physical money, so pointless this day in age.
With skyrocketing housing costs, I don't know how you will afford to live in the city containing your job.
I guess you can rent, but at least people whoput money down on a house have property at the end of the payment.
Although i do agree with the credit card view. At this point in my life i only have a card for emergencies, the rest goes debit, i hate using physical money, so pointless this day in age.
And the rich are just abused, opressed people who never stop whining or reminding us that they are "carrying the weight for the rest of us". You know how much bigger of a yacht or mansion they could buy if it wasn't for those damned unfair taxes??
Meanwhile back at the ranch, the rest of us are trying to figure out how to afford sending their kids to college, buying a decent vehicle, paying their docotr's bill, or having a decent vacation. So let's give the oppressed rich people more money by shifting the tax load to the middle class.
This whole notion of stimulating the economy from the "top" down is total BS. We've been there and done that and it isn't working. When the money gets to the top, it stays there. The best way to stimulate the economy is from the bottom up. Of course, that's inflationary and the GOP wouldn't want that, would they??
LMAO
You're either not paying attention, Skoorb, or you're believing things that aren't true. As the links I posted above point out, the total tax rates for all income groups are very much the same. That's total tax rates- federal, state, local, everything combined. I also pointed out, and the links confirm it, that those at the very top pay a lower federal tax rate, by ~5%, than the rest of the top 1%- which means, obviously, that their total tax rate is lower, too, given that federal income tax is intended to be the great equalizer of other regressive taxes that we all pay.
But it's not, not anymore, and is becoming even less so with the current Repub leadership. For Americans in the lower percentiles, taxes are a sacrifice. We give up a better life for ourselves and our children when we pay them. We also recognize taxes as a necessity, believing that there's a practical benefit to government that outweighs the other sacrifice. Those at the top sacrifice very little to pay their taxes. 23% of $24M, the average income of the top .01%, isn't much of a sacrifice, at all. They still want for nothing that money can provide, seeing as how they have over $18M left... Wealthy Americans will suffer zero impact on their lifestyles or the well being of their families at even higher taxrates, those of 1980, for example. They'd still have $15M left, ten times the lifetime earnings of the average worker...
I'd personally be very happy to pay even more to live in a society that granted me the ability to achieve that kind of income, as I'm sure would be most Americans. It would be very nice indeed to arrive well beyond the practical boundaries of the marginal utility of money.
But it's not, not anymore, and is becoming even less so with the current Repub leadership. For Americans in the lower percentiles, taxes are a sacrifice. We give up a better life for ourselves and our children when we pay them. We also recognize taxes as a necessity, believing that there's a practical benefit to government that outweighs the other sacrifice. Those at the top sacrifice very little to pay their taxes. 23% of $24M, the average income of the top .01%, isn't much of a sacrifice, at all. They still want for nothing that money can provide, seeing as how they have over $18M left... Wealthy Americans will suffer zero impact on their lifestyles or the well being of their families at even higher taxrates, those of 1980, for example. They'd still have $15M left, ten times the lifetime earnings of the average worker...
I'd personally be very happy to pay even more to live in a society that granted me the ability to achieve that kind of income, as I'm sure would be most Americans. It would be very nice indeed to arrive well beyond the practical boundaries of the marginal utility of money.
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