Okay, well I’m not really “with” stupid, but apparently they are everywhere. For the 21st consecutive month, my fellow Americans have spent more money than they’ve made. The national savings rate has hit a negative 1%. The only other time that we’ve seen this is during the great depression but there is a difference. During the great depression, people were dipping in to their savings to pay for basic necessities. Fast forward to 2007 and people are dipping in to their savings, or tapping their credit to buy flat panel tv’s, new cars, the latest electronics etc. I just can’t see how we aren’t headed for a nasty fall. Unfortunately, we all fall with these people to some extent.
Disclaimer: Certainly there are people that are spending more than they make to meet their basic needs. (and I mean BASIC needs). These people aren’t doing something wrong, rather, they are simply trying to survive in the rat race and the minimum wage levels that our govt has passed aren’t getting them there. Sure, some would tell them to pick themselves up by their boot straps and better themselves. Tell that to a single mom raising two kids in an impoverished area of the country. I’m sure she’d be really receptive to that input.
http://seattlepi.nwsource.com/business/1311AP_Econ…
Wow I am getting tired of people saying a negative savings rate is the end of the world. For the last time, this metric does not include “savings” such as capital gains and dividends. SAY IT WITH ME NOW: the negative savings rate reported by the media is a scary number made all the more scary by the fact that it is bogus.
Happy to help,
nick
Call it whatever you want but if you use it as a trend, the current statistic isn’t exactly pretty. The average level of consumer debt in this country is really rather amazing.
I don’t think we will see a positive savings rate again for decades. From what I can tell, the people retiring aren’t earning money anymore and are mostly spending. Since this demographic is disproportionate to the next generation, this seems like an expected phenomenon. I don’t think there is much more irresponsiblity than normal. The savings rate quote is probably losing its credibility and just makes a good story line. The trend doesn’t bother me because I think it is supported by the aging population.
Hazzard, do you know what the average level of consumer debt is?
Better question… Do you know what consumer debt is? I don’t know for sure, but I’ll take a shot: Consumer debt is debt on depreciating assets. Them’s fancy words for credit cards and auto loans.
So let’s break it down. According to Jan 2007 Money magazine, the average balance on a credit card — for a person who carries a balance — is $3525. Is that amount “rather amazing”?
As for auto loans, I just googled for the average. In October 2003, the average car loan amount was $23801, according to edmunds.com. The monthly debt service on a 5-year $23801 loan at 6.9% is 470.17. While high, I am not blown away by that number nor am I despondent over it’s implications.
nick
I think my general feeling is that, as a nation, we are in far worse financial shape than we were 10, 20 or 30 years ago. I enjoyed looking at the statistics in this bankrate article:
http://www.bankrate.com/brm/news/debt/debtguide2004/debt-trivia1.asp
They list average credit card debt at $9205. (There are a bunch of other interesting statistics in the article as well.)
Certainly I have my opinion and have sought out supporting docs to reinforce them. Nice to see the different perspectives.
This is such a scary statistic. I read the whole article and during the depression 1/4 of the workforce was unemployed. Our current unemployment rate is around 4.5%! I have several young 30 something employees that don’t contribute to our work retirement plan which includes a match!
Hazzard: agreed. And I would like to add that I am frustrated by the wide range of stats on the credit card debt. It’s prolly the most important stat out there that would indicate the overall health of the US consumer, and there are so many different numbers. Hell, I even heard an ad on the radio for a credit counseling agency that claimed that the average consumer credit card debt is $20,000. I am not exaggerating, that’s the claim they made.\
Anyway, I like a good debate too!
-nick