The Great Consumer Crash of 2009

[Mermaid]

>>There has been and will be resistance to the inevitable deep recession that is coming. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The ?material generation? needs to dematerialize.<<


I am so happy being fashionable at last! Thanks, Shelly.

 

[Miss Kitty]

>>There has been and will be resistance to the inevitable deep recession that is coming. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The ?material generation? needs to dematerialize.<<


I am so happy being fashionable at last! Thanks, Shelly.

...did your ears burn yesterday? I found the bargains of the century in a shop before we left Banff...first thing I told Mr. K was..."Mermy will love this!"

Poor poor souls...the joy of frugality is the best thing to possess!

 

[30ashopper]

>>There has been and will be resistance to the inevitable deep recession that is coming. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The “material generation” needs to dematerialize.<<

I think they are quite willing to change on their own! They just needed a little push in the right direction.

 

[dunefrog]

Savings Rate?

Ok. I know this is going to be a boring read compared to the polemic that Shelly posted. But that polemic was based on statistical data regarding the savings rate. Well guess what? Statistics don't always tell the whole story.

This article (http://www.kc.frb.org/PUBLICAT/ECONREV/PDF/2Q06garn.pdf) is an economist's take on the so-called "savings rate." He tells you how it is calculated. But more importantly how this caculation changes over time to adapt to changes in economic reality.

Bottom line: he says there is always a lag between how the savings rate is calculated and what is really happening in the economy. In other words, the current economic model probably does not fit the way the world currently works; it fits the world as it worked a few decades ago.

In the 70s, most people "saved" in bank accounts or CDs; now people have most of their savings in mutual funds, stocks, bonds, real estate. The rate of growth for these new savings vehicles is much higher (over the long term) than a bank account or a CD. The savings rate as it is currently calculated does NOT take into account asset appreciation at all, but instead it looks only at the amount you spent to buy that asset. This is a big flaw in that model because people will not sock away 10% of their income like there parents did if they can sock away 2% now and end up with the same 10% at retirement because they invested in assets with a higher rate of appreciation.

Now I'm not saying the savings rate hasn't declined a bit. And I'm not saying that frugality and responsibilty are bad. I'm just saying that we need to be careful not to be scared too much by the Chicken Little's among us.

 

[SHELLY]

I think they are quite willing to change on their own! They just needed a little push in the right direction.

That's a snapshot of the "economic stimulus checks," it will disappear quickly.

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[SHELLY]

Bottom line: he says there is always a lag between how the savings rate is calculated and what is really happening in the economy. In other words, the current economic model probably does not fit the way the world currently works; it fits the world as it worked a few decades ago.

In the 70s, most people "saved" in bank accounts or CDs; now people have most of their savings in mutual funds, stocks, bonds, real estate. The rate of growth for these new savings vehicles is much higher (over the long term) than a bank account or a CD. The savings rate as it is currently calculated does NOT take into account asset appreciation at all, but instead it looks only at the amount you spent to buy that asset. This is a big flaw in that model because people will not sock away 10% of their income like there parents did if they can sock away 2% now and end up with the same 10% at retirement because they invested in assets with a higher rate of appreciation..

There's a BIG difference between "Saving" and "Investing." "Savings" is low risk/low reward used for emergencies or living expenses for those who have a very short investment horizon; whereas "Investing" is RISK/reward. BOTH are required--sacrificing one for the other is a seriously risky proposition. Many who cashed in their CDs, cleaned out their 401k's and raided their kid's college funds to load up on preconstruction "investment" condos in 2005 (or loaded up on financial stocks a year ago) are now aware of the risk of not having sufficient "savings" to back them up.

Now I'm not saying the savings rate hasn't declined a bit. And I'm not saying that frugality and responsibilty are bad. I'm just saying that we need to be careful not to be scared too much by the Chicken Little's among us.

The word is "prepared"...not "scared."


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[Mermaid]

That's a snapshot of the "economic stimulus checks," it will disappear quickly.

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Our economic stimulus check was a whopping $56, about which my bank teller commented (as I deposited the WHOLE thing ): "Wow! This is the worst one I've seen so far!!!!"

 

[dunefrog]

There's a BIG difference between "Saving" and "Investing." "Savings" is low risk/low reward used for emergencies or living expenses for those who have a very short investment horizon; whereas "Investing" is RISK/reward. BOTH are required--sacrificing one for the other is a seriously risky proposition. Many who cashed in their CDs, cleaned out their 401k's and raided their kid's college funds to load up on preconstruction "investment" condos in 2005 (or loaded up on financial stocks a year ago) are now aware of the risk of not having sufficient "savings" to back them up.
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Really...:shock: The essence of the article I posted was that you can't just look at the falling "savings rate" to tell if Americans are becoming more "irresponsible." You have to look at the bigger picture. Investments are part of that bigger picture and tell the opposite story.

And of course investments are riskier than traditional savings. That's why they bring a higher return. And who said that some savings was not a good thing? Who are you arguing with?

Did mommy and daddy raid YOUR college fund? Is that what this is all about? There now.

 

[SHELLY]

Really...:shock: The essence of the article I posted was that you can't just look at the falling "savings rate" to tell if Americans are becoming more "irresponsible." You have to look at the bigger picture. Investments are part of that bigger picture and tell the opposite story.

Americans have become more irresponsible--one just needs to look past the government's smoke and mirrors that's trying to convince us otherwise.

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[Chickpea]

Americans have become more irresponsible--one just needs to look past the government's smoke and mirrors that's trying to convince us otherwise.

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Cannot imagine anyone disagreeing with this. It is just amazing to me that it is only now that people (some at least) seem to be waking up!! We are in for a tough tough road ahead and the friggin past 8 years of this pathetic administration have just exacerbated and highlighted the problems.