Failure to save is no more

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Finn's picture
Finn
Status: Member (Offline)
Joined: Aug 14 2008
Posts: 2
Failure to save is no more

Thank you Chris for your work. The quality of the crash course is extremely good. You could easily work as a professional narrator for documentaries, but obviously that would be a waste of your more important talents.
However, I would like to point out that this particular lesson about savings would need updating. We are living in interesting times, and the times are changing. Particularly, the failure to save is no more. The US people are saving again, and the change has been most abrupt:
http://www.bea.gov/briefrm/saving.htm
In addition to that, the credit crunch is intensifying. Debt is being defaulted on increasingly everywhere except for the government. Housing prices are going down. Commodity prices - including gold - are going down. Asset prices are going down, the stock market has suffered a lot. Wages are more or less stagnant. The current account deficit is shrinking, and excluding oil it is shrinking fast.
All these point to a simple conclusion. The debt binge is over. Inflation, a monetary phenomenon, is going to be over as well. The only entity left creditworthy for the time being is the US government. The people and the enterprises in the country are losing their creditworthiness rapidly. That is not inflationary at all. Deflation looms. You guys are savers again. The dollar is getting stronger, not weaker, compared to other currencies. One can buy more housing or (used) cars with a buck every day. Deflation, not inflation.

dctarheel's picture
dctarheel
Status: Member (Offline)
Joined: Aug 20 2008
Posts: 1
A bit early for that comment...

Finn -

You talk about the debt binge being over, and inflation being over. Are you basing this on the activities of the last month? I would suggest that that is a bit too short of a time period. Chris is looking at problems that came into being in the last 30 years. Surely there were plenty of other months where the dollar deflated. But it is the value over the long term that is scary. A couple examples:

  • Gold:
    • Over the last month, gold have come down by over 17%!
    • Still, over even just the last 3 years, we've seen gold more than double in price, including this recent drop, and others like it
  • The US $:
    • Again, over the last month, we see a very nice rally out of the dollar.
    • However, it is still well down over again just the last 3 years
  • The same can be said for commodities, oil,silver, etc...

I'm not saying that you are necessarily wrong. This could be the beginning of the turn around. But if so, it is just the beginning.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5729
  Finn, The savings

 

Finn,

The savings rate boost is an artifact of the stimulus checks.  I'll need to see how that finishes out by the end of the year to make any statements about a change in trend. It could be, I just think it's too early to tell.

I agree that deflation is going to rule for a while.  The bet I am making is that the monetary authorities are going to panic and start directly monetizing debt (electronic money printing, that is) sometime before the second quarter of 2009 but possibly as soon as Nov/Dec 2008.

We'll see.

Thanks for the great comments everyone.

Chris Martenson

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