Sunday, May 10, 2009

Thrifty is Nifty

I've been reading lately a whole slew about how thrifty Americans have become all of a sudden. The savings rate, according to an article in the NY Times this morning, has risen from zero percent to a bit over 4, in the last year. We went from a savings rate of 14 percent in the 1970s, to negative 2.7 percent in 2005, meaning Americans were spending more than they made.

Corporations had been salivating on the heels of these numbers. They had finally turned us into super-consumers who were actually brainwashed into living on credit. I recall a conversation I had with a friend in 1997 in which I extolled the virtues of paying off your home as fast as possible. My parents paid off their first home in 7 years, and their second in two. My friend shook her head and proceeded to explain how it's "healthy" to be in mortgage debt, and get to write off the interest at tax time.

Stupid Americans! (I thought). They'd rather pay off a mortgage perpetually and deduct A PERCENTAGE of the interest paid from taxes, than not have a mortgage at all. I never understood it. And never will. Perhaps I'm old school, but my idea is not busting out half my salary on a mortgage for the rest of my life. I'd rather take that $1500/month and store it up for travelling to Italy, Spain, France, Bali, Tokyo, Melbourne....somewhere else.

Now the Econ experts are biatching about how we're all going to railroad the already-struggling economy by not spending. I just shake my head at all of this; they continue to drive into our heads this horseshite that has already bankrupted us. But how to get the economy started again? Spend! Spend what? I think it's time for a new model, fellas.

In any case, I don't believe the majority of Americans have learned their lesson; they'll store away capital out of necessity, not enlightenment. But I am optimistic that our government will regulate bank products such as no-down-payment or no-income-verification mortgage loans and credit lines, thus putting some sort of halt on the Frankenstein that has been created by banks.

And a quick shout-out to all skewed, warped Americans who are now holding their heads in sorrow over the fact that they can no longer afford that third SUV: WAKE UP! "He who dies with the most toys..." still dies.

Let us know how well that overdrive system works in the 9th Circle of the Inferno.


Erin O'Brien said...

Oh how I detest the I-need-stuff driven American!

admiralmpj said...

The Economy’s a circulatory system. The healthy flow of money to and fro, is what’s key to that rising tide lifting all boats. Lack of Government Oversight and Regulation (especially from 2001-2008), allowed money to pool in too few places (see: Wall Street, Oil Barons, etc), damaging everyone and everything.

So the Economists are right to say that, in the short term, getting money flowing through the system is necessary. They’re also right to say that Americans suddenly discovering thrift hasn’t helped matters, but they would also say that’s the irony. Because saving is a habit We The People should have picked up during the good years, not now that its bad. Just as we need our fellow Americans to spend, they’re hoarding (saving) because they’ve been burned or afraid they’re going to be. (Job losses are still supposed to tick up until 2010).

So what Americans are doing is completely justifiable behavior, but the Economists are right to say it’s not helping, right now.