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Guest Post: The Decline Of The American Saver And The Economy

Tyler Durden's picture





 

Submitted by Lance Roberts of Streettalk Advisors

The Decline Of The American Saver And The Economy

In the most recent release of the Personal Income and Disposition report by the Bureau of Economic Analysis the headline numbers were seemingly very good with personal consumption expenditures up 0.7% and personal incomes rising 0.3%.    Unfortunately, that is about where all the good news ended.

We have been discussing as of late in previous articles about the dynamic change that has taken place since 1980 in our country.   There is almost a clear demarcation line that exists at the end of the 70's as we shifted from a manufacturing and production society to a financial and service based society.    No matter how you look at it - whether through GDP, debt, incomes, savings or consumption; beginning in 1980 there is a clear decline in the quality of financial health of both individuals as well as the country.


 
You can see this clearly in the current release of the personal income and disposition figures.   In 1980, the year over year change in personal incomes hit their highest peak at almost 12%.   Personal incomes had been steadily rising since 1959.   Not surprisingly, there is a very high correlation between the year over year change in incomes and personal consumption expenditures.

This change in income and spending behavior can be, in my humble opinion, directly tied to the increases in productivity through technological innovation which has impacted incomes but it was the deregulation of the financial industry over the last 30 years that most affected consumer behavior.    The later is the most important point for this discussion.   

During this time frame the consumer, due to enticements from the financial industry for easy credit, a booming wealth effect from the stock market and then housing, and a easy and accommodative monetary policy, shifted from a "save and then spend" society to a "spend and pray" society.   This is clearly seen in the decline of the personal savings rate.  The vertical black line notes the apparent shift in consumer behavior.  The difference between pre- and post-1980 was productive investment.

Productive investment comes from savings which leads to stronger economic growth.   This is most clearly seen in the steady decline of GDP as compared to Personal Savings.  As consumers migrated from saving and productive investment the output of the economy has likewise declined.   As Americans became addicted to a lifestyle they could not really afford the need for "fast money" became ever more apparent.   The "greed factor" was then fed upon by the financial institutions that were more than happy to increase the leverage cap on consumers.   This in turn led to the eventual bust in 2000 and then again in 2008.    The government, via the Fed, was also complicit in this turn in the average American by fueling speculative excesses through easy monetary policies and excess liquidity.

 

So, now that you have the background to this story - let's take a closer look at the income and disposition numbers starting with the income side of the equation.    Where did the income increase come from?   It wasn't coming from wage increases as shown.   This, of course is really not much of a surprise considering that the whole increase in corporate profitability came from cost cutting (lower headcounts) and increased productivity (employees doing more for less money).   This, of course, is not a sustainable trend which is why we are deeply concerned about corporate profit margins in the coming quarters - however, I digress.

The most telling increases to personal income have come from government transfers (welfare, unemployment, etc.) and some of the lowest taxes as a percent of income on record (recent payroll tax cut for example).   While this artifical boost has come at a much needed time these are again artifical stimuli and are transient in nature.   For a long term economic recovery real wages need to increase in order to support longer term consumption patterns that are traditionally supportive of a growth economic structure - this includes an increase in personal savings.   In more simplistic terms - America needs to get back to the point where it saves more than it spends.

However, that brings us to the disposition part of the consumption function.   If consumers are earning less on a prorata basis but spending is increasing, then where is that consumption flowing to?    The chart shows the percentage change in the actual dollars (seasonally adjusted) spent in the PCE report on food and energy relative to disposable personal income.   Not surprisingly since the bottom of the "official" recession - food and energy have been rising fairly sharply and the trend since 2000 has been a larger portion of the disposable budget being eaten (literally) by these two areas.   This, of course, reduces the overall growth in disposable personal income and when the family budget is already under duress this leads to cuts in overall consumption trends.
 
The bottom line, and as shown in our final chart is that previous to 1980 when our economy was built around a balanced consumer - consumer savings ranged around 8%, GDP was growing and consumer spending averaged between 61-63% of the economy.   Post 1980 - as the introduction of leverage and financial charades took the place of common sense; consumption has been steadily increasing to over 70% of the economy today while GDP has been steadily declining to the whopping 3% average GDP environment that we are trapped in today.

The problems that exist today are a function of America, as a whole, losing sight of what brought this country to its feet.   A generation of savers and investors (individuals that took capital and built something with it) has turned into a generation of gamblers and speculators in many regards trying to build wealth through service based programs and financial transactions that generate little or no economic throughput. The end result will be a malaise of economic growth into the future plagued by higher levels of real unemployment, a weaker financial system as 78 million baby-boomers become net capital extractors and higher interest rates and inflation caused by excessive liquidity and theoretical monetary policy.

 


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Tue, 03/29/2011 - 14:33 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Buy silver!

Tue, 03/29/2011 - 14:35 | Link to Comment tekhneek
tekhneek's picture

buy guns.

Tue, 03/29/2011 - 14:36 | Link to Comment Long-John-Silver
Long-John-Silver's picture

I did that long ago.

Tue, 03/29/2011 - 14:39 | Link to Comment TIMMAYYY
TIMMAYYY's picture

buy a ticket outta there...nice knowing you america,

You wouldn't think so judging by the media image they pump around the world about what america is like.

Tue, 03/29/2011 - 14:44 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

In the game of 'who sucks the least', we are all kings and queens.

Tue, 03/29/2011 - 14:59 | Link to Comment Sudden Debt
Sudden Debt's picture

queens as in gay?

 

Tue, 03/29/2011 - 14:47 | Link to Comment breezer1
Tue, 03/29/2011 - 14:41 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Plenty of guns.  Not that much silver.  I am sticking with the catch phrase I came up with.

Tue, 03/29/2011 - 15:40 | Link to Comment AcidRastaHead
AcidRastaHead's picture

Buy silver guns!

Tue, 03/29/2011 - 14:38 | Link to Comment unwashedmass
unwashedmass's picture

 

yeah, and then, there's the bunch of us so terrified by what Ben is doing that we've taken out wealth out of the system and put it into gold and land....

Tue, 03/29/2011 - 14:44 | Link to Comment impending doom
impending doom's picture

Is silver a productive asset?

Tue, 03/29/2011 - 14:47 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Does the Pope dress up like a liberty cap mushroom?

Tue, 03/29/2011 - 14:58 | Link to Comment Sudden Debt
Sudden Debt's picture

can you handle the truth?

 

Tue, 03/29/2011 - 15:33 | Link to Comment depression
depression's picture

NO, I wouldn't know the truth if it stepped on my foot.

My daily meditation is: Shoot first and ask questions later.

Tue, 03/29/2011 - 21:03 | Link to Comment francis_sawyer
francis_sawyer's picture

Does this sound like a Geico commercial?

Tue, 03/29/2011 - 21:29 | Link to Comment TBT or not TBT
TBT or not TBT's picture

Does a doomer meme collect no moss?

Tue, 03/29/2011 - 15:43 | Link to Comment MX_DOGG
MX_DOGG's picture

Man I hope this site doesn't get bought. just sayin..

Tue, 03/29/2011 - 14:37 | Link to Comment Long-John-Silver
Long-John-Silver's picture

I convert my FRN's to physical Gold and Silver as soon as I get them no matter the current price. Am I the problem?

Tue, 03/29/2011 - 15:58 | Link to Comment Strider52
Strider52's picture

No wonder personal spending is up. Gas and food cost a lot more nowadays.

 I just bought a silver (and black) gun. I already have silver & gold, plenty of canned food, bought at 1/2 the current price. Hey, does that make stored food an inflation-hedge?  Now I gotta go get 10-20 of those monster plastic water bottles.

Tue, 03/29/2011 - 17:56 | Link to Comment RafterManFMJ
RafterManFMJ's picture

I buy sardines by the 12 pack on Amazon. In Olive Oil. MMmmm. Bought 3 packs last year for 19.95 per, and just got on last night to buy some more. On Aug. 17 of last year, I paid 19.69. Today, they are 28.73. Holy Smokes! I can no longer afford sardines, probably to my co-workers delight.

 

Tue, 03/29/2011 - 18:37 | Link to Comment Mr Anderson
Mr Anderson's picture

Do you live in a rural area as well?

Do you have a well?

The easiest prepartion is location.

 

Tue, 03/29/2011 - 21:33 | Link to Comment TBT or not TBT
TBT or not TBT's picture

Or you can live in a city, and have plenty salt stored for human meat preservation.

Tue, 03/29/2011 - 22:34 | Link to Comment Mr Anderson
Mr Anderson's picture

haha, to each his own.

I prefer-

Beef, venison, turkey, salmon, trout, fruit, and vegatables.  (lets not forget wine)

At least we know your a true survivor TBT.

Tue, 03/29/2011 - 14:38 | Link to Comment trav7777
trav7777's picture

working and saving has been a fool's game for 30 years.

If you speculated and spent, you came out far ahead.  This is a direct consequence of the financialization of the economy.

Why produce anything when you can participate in a ponzi scheme run by the government?

Tue, 03/29/2011 - 14:41 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

What matters is what you spend on.  If you bought a house in Tokyo, then you fucked up.  If you bough land in L.V. you did too.  If you bought silver at $5, well, the rest is in the books.

Tue, 03/29/2011 - 15:56 | Link to Comment depression
depression's picture

Is buying silver at $ 7 spending money ?!!???

The nice thing about silver is, as long as you do not sell it, you pay no taxes on the gains.

Tue, 03/29/2011 - 17:05 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

" If you bought silver at $5, well, the rest is in the books."

Silver covers the last 10 years.  What about the previous 20 years? Even if you were smart/lucky enough to grab gold and silver in 2002, it is still not enough.

What can you say about a system that made "working and saving [...] a fool's game for 30 years."

Tue, 03/29/2011 - 14:47 | Link to Comment SteveNYC
SteveNYC's picture

With ever-declining interest rates and (as you said) the financialization/Ponzification of the economy, the "saver" has been raped almost to his/her/its last penny in the US. Unless you are part of the uber-wealthy, the "saver" is almost extinct. The only way to save is in PM's or offshore. Saving in the US is a non-starter.

Tue, 03/29/2011 - 15:01 | Link to Comment Encroaching Darkness
Encroaching Darkness's picture

I think you've hit on it - the savings IN AMERICA of American households is probably pretty small - after all, you're taxed when you earn it, the interest is taxed as it's earned and the distributions are taxed when they come in. The only way to avoid negative returns is to invest overseas, in PMs or something that the Feds can't steal and waste (like they stole and wasted the SS contributions).

No one with a working brain would play a casino where the house is so rigged against the bettors, so OF COURSE savings IN AMERICA are down - if you have any sense, you're refusing to lose by refusing to play!

 

Tue, 03/29/2011 - 16:35 | Link to Comment aerojet
aerojet's picture

None of the spendthrifts went through any such rational decision-making when they decided to hit the gas on spending.  It just felt good.  As far as the rest of your bs statements, let me only say this:  People who do not save get fucked because at some point down the road, your entire life grinds to a halt due to an illness or other emergency and you had better have cash saved for that time.  So if you were to say that the Fed and the Government is robbing Americans of their security, well, that is correct, but it is incorrect to say that saving for the future is stupid or a fool's errand.  All that you are really doing is making excuses about why you're not changing your behavior to get in line with the new reality.  They squeeze you, you have to cut more spending so  that you always have something set aside for the big rainy day.

Tue, 03/29/2011 - 17:07 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

"it is incorrect to say that saving for the future is stupid or a fool's errand.  All that you are really doing is making excuses about why you're not changing your behavior to get in line with the new reality."

I have saved 20%+ of my wages every year for 30 years, and I am telling you that working and saving has been a fools game.

Tue, 03/29/2011 - 14:49 | Link to Comment Pseudo Anonym
Pseudo Anonym's picture

Why produce anything when you can participate in a ponzi scheme run by the government?

are you having fun yet?  That's what I want to know.

Tue, 03/29/2011 - 14:52 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Translation; the financial sector of the American economy (which produces NOTHING of real value but owns your politician) remains a cancer on the broader sections of the economy.  What to know why companies and individuals that actually add real value to the economy are not spending?  Simple, they are tired of supporting the cancer.  FYI, the cancer gets it's money via the government and taxpayer rape.

Tue, 03/29/2011 - 15:16 | Link to Comment NotApplicable
NotApplicable's picture

So, Trav succinctly states the nature of the world's economic problem, and all you want to know is if he's having fun? Really?

As long as his question remains valid, there are no solutions to life's problems. Also, add to Trav's question the fact that the producers are the target of the ponzi, making the "Why?" all the more relevant.

I realize that sparring with Trav is considered sport around here, but don't let it blind you to any valid questions he may present, as that makes Baby Jesus cry, and in this case, aids the criminal perpetrators.

Tue, 03/29/2011 - 16:26 | Link to Comment Pseudo Anonym
Pseudo Anonym's picture

all you want to know is if he's having fun? Really?

it comes down to complicity. Do I want to have fun swimming with the big fish ("aid the criminal perpetrators" - as you put it) defrauding savers or do I choose not to be a part of the ponzi scheme and not have fun.  That's the succinctly stated and valid question.  Isn't it?

Tue, 03/29/2011 - 17:11 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

" Do I want to have fun swimming with the big fish "

Are you actually saying that little fish can swim with the big fish?  Are you saying the playing field is level?

Tue, 03/29/2011 - 18:05 | Link to Comment Pseudo Anonym
Pseudo Anonym's picture

Are you actually saying that little fish can swim with the big fish?

yes, I am - using Trav7's definition.  If the majority, the likes of Trav, were not participating in the ponzi scheme, we would not be in this pickle.  Would you not agree with that?

Tue, 03/29/2011 - 20:17 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

If the majority did not participate we would not be here now.  But it is a little more complicated than that.  The rewards for participating (for the better part of 30 years) were substantial.  Those who did not participate got quite the opposite.

But ultimately the laugh is on everyone, except those who played, blew up and got bailed out.  And they knew in advance that they would get bailed out.  And why not?  They were doing G-d's work.  As opposed to me, satan's henchman, I suppose.

/sarc

Tue, 03/29/2011 - 21:20 | Link to Comment Pseudo Anonym
Pseudo Anonym's picture

Those who did not participate got quite the opposite.

Those who did not participate (I was not one of them) and "knew in advance" (I was not one of them) were converting hofjuden fiat to PM and are now (or soon to be) set for two lifetimes.  Needless to say, only those at the top of the pyramid "knew in advance".  You have a valid point, nevertheless,  given only few knew.  However, that is not a reason to glorify Trav's summary of the situation today.

Wed, 03/30/2011 - 06:51 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

"However, that is not a reason to glorify Trav's summary of the situation today."

Trav's point is dead on, IMO.  I've been living it for 30 years.  That is several levels above believing my own lying eyes.

Tue, 03/29/2011 - 20:08 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

.

Tue, 03/29/2011 - 14:56 | Link to Comment Robot Traders Mom
Robot Traders Mom's picture

The ponzi only works until it doesn't. Millions upon millions of schleps are going to be left holding the bag and it won't be pretty...

Tue, 03/29/2011 - 15:01 | Link to Comment 10kby2k
10kby2k's picture

 

How would you have avoided getting booted off the ponzi in the 2 market crashes in last 11 years? 

 

Tue, 03/29/2011 - 15:12 | Link to Comment TruthInSunshine
TruthInSunshine's picture

If you speculated and spent, you came out far ahead.  This is a direct consequence of the financialization of the economy.

 

Everyone I know, and I know quite a few, who followed your suggestion, are now either broke dicks (after being virtual kings), or are well on their way.

Liquidity is king. Debt is suicide. Always was. Always will be.

Everyone will soon see that this crisis ends the same way all other crises ended before. Harvest time is coming, and it's going to be painful for those not liquid.

Tue, 03/29/2011 - 16:37 | Link to Comment aerojet
aerojet's picture

Exactly right and perfectly said.  Any other opinion on this matter is a rationalization of some kind.

Tue, 03/29/2011 - 14:46 | Link to Comment LauraB
LauraB's picture

Great article!  Well said!

The only way for the economy to recover is to flush the bad debt from the system (making those who were responsible for it -- i.e. banks and borrowers -- responsible for the losses rather than pushing it off onto current taxpayers and future generations) and encourage savings rather than borrowing.  We also need to end the Fed so that our savings are not dilluted by money printing.

Tue, 03/29/2011 - 14:49 | Link to Comment TruthInSunshine
TruthInSunshine's picture

I just applied for The Bernank Card.

It's a new credit card that lets me buy shit for 1/4 of one percent interest, roll over the principal as often as I'd like, and my minimum monthly payment is $5.

Oh, there's no credit limit, and if I ever default, The Bernanke guarantees my obligations.

Everyone should have one of these The Bernank Cards. They're very nice to have.

Tue, 03/29/2011 - 15:29 | Link to Comment kaiserhoff
kaiserhoff's picture

+ Don't think of it as money.  It's only magical beans.

Tue, 03/29/2011 - 16:01 | Link to Comment SubjectivObject
SubjectivObject's picture

The Bernank America Card

You may have a viable trademark there.

Tue, 03/29/2011 - 14:48 | Link to Comment I am Jobe
I am Jobe's picture

Buy silver and guns and food. Nothing else needed. Avoid SLV, another manipulated crap by Whore Street.

Tue, 03/29/2011 - 15:16 | Link to Comment The_Euro_Sucks
The_Euro_Sucks's picture

''Buy silver and guns and food. Nothing else needed.''

 

Water, gold (not GLD), heating (defenately where I live) not needed? Basic medical equipment is also handy. I like the tagline on Turds blog ''The end of the Great Keynesian Experiment is upon us. Prepare accordingly.'' 

Tue, 03/29/2011 - 16:38 | Link to Comment aerojet
aerojet's picture

I never was able to sell a used gun for more than I had in it, so I'm not sure where you're coming from with the whole "buy guns" thing.  They're a pretty shitty investment, quite frankly.  If you think you're going to kill people with them, well, you'd be wrong.

Tue, 03/29/2011 - 18:35 | Link to Comment ZapBranigan
ZapBranigan's picture

 

Let me ask you this: What item on the market can you buy, use over and over and over again for years on end, and still get 90% of your purchase price back?

Yeah, that's what I thought....

You don't know what you're talking about dude, so shutty.

 

Tue, 03/29/2011 - 21:36 | Link to Comment TBT or not TBT
TBT or not TBT's picture

Ahem, we have bought tens of thousands of nukes and only exploded two of them in, what is the phrase now, kinetic military actions.    As a result, we did not have a ginormous conventional war, and did not live under communist tyranny.  

Guns are kinda like that.  The ability to kill people, the presence and readiness of the right gun properly loaded and in your hands, prevents you from needing needing to.    If you don't have it, well you can be dead instead.

Tue, 03/29/2011 - 14:49 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Damn the physical laws of Nature and this finite planet.  Silver, guns, and healthy attorneys (they keep the tax man away and are good eating when need be).

Tue, 03/29/2011 - 15:04 | Link to Comment countryboy42
countryboy42's picture

Not much to eat on a lawyer, all they are is lips and asshole. Guess you could make them into hot dogs.

Tue, 03/29/2011 - 15:31 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Excellent post.  

Tue, 03/29/2011 - 14:52 | Link to Comment Mr Anderson
Mr Anderson's picture

"For a long term economic recovery real wages need to increase in order to support longer term consumption patterns that are traditionally supportive of a growth economic structure - this includes an increase in personal savings"

I just got out of a meeting with the mayor of our town. In order to close (not balance) the budget deficit the the union is agreeing to 10+ percent cut in wages & benefits.  The County is requiring 5% wage cuts across the board.

1st question- Is this the signs of the government bubble popping at the local levels?

2nd question- wages are going down- how does this correlate to Tylers statement above? (is it the term "real wages")

3rd question- in order for personal savings to go up, doesn't that require that interest rates go up? ie. why save if i'm not getting a return on the money.

I appreciate the education and help from all the intelligent men & women on this.

Regards,

Tue, 03/29/2011 - 15:01 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Real asset deflation.  Time for the haircuts the bernanke has been trying to avoid for so long.  To those who pay their bills and are productive members of society, deflation is not feared.  Just think if the banks actually had to use mark to market accounting rules again?  Once you go down the road of "mark to fantasy" coming back to reality means you lose all that paper "value" (think about the over 100 trillion in derivatives and shadow banking).  The truth is the "value" is a fraud, just like the debt being forced upon the world.

 

Crash the system, crash it now.  The sooner we do, the sooner compensation will return to those who are actually worth a shit.  All we have to fear, is, quite literally, fear itself.  The modern (central bank educated) economist depends on fear to keep monetary policy going.

Tue, 03/29/2011 - 15:00 | Link to Comment Bam_Man
Bam_Man's picture

This process is is what is generally referred to as a "declining standard of living".

Tue, 03/29/2011 - 21:01 | Link to Comment ToddGak
ToddGak's picture

You got it...declining wages PLUS rampant commodity inflation...double whammy.

Tue, 03/29/2011 - 14:52 | Link to Comment Saxxon
Saxxon's picture

You guys are a bit feverish.  Sign of a top.  The pendulum is about to swing the other way.

Tue, 03/29/2011 - 15:00 | Link to Comment Sudden Debt
Sudden Debt's picture

You where short months ago and calling partytime when silver dipped 1,5$.

I think your last straw is crumbling to.

Tue, 03/29/2011 - 14:55 | Link to Comment mynhair
mynhair's picture

This is just an undeclared Kinetic Windowdressing Action.

Tue, 03/29/2011 - 15:00 | Link to Comment tbd108
tbd108's picture

This issue goes back to the post Vietnam period when savers were screwed out of their savings by the high inflation. Millions got essentially free homes due to their mortgages getting paid off by inflation but millions others lost the real value of their money (that had gone into the housing market) in Savings and Loan accounts. With the view "once shame on you, twice shame on me," Americans stopped saving. This is the fruit of the awful war which I, very unfortunately, was part of.

Tue, 03/29/2011 - 15:00 | Link to Comment unwashedmass
unwashedmass's picture

i do know that i don't "save" in a bank or a brokerage. All savings are in metals, hard metals.....

and i don't think i'm ever going to save in a bank or a brokerage ever again, or in USD.....

my confidence is totally shot.

Even more dismaying is the government's efforts to destroy anyone who is like this -- notice the CTFC colluding with the Fed and JPM to hold the metals down......and rampant corruption there.

we're at the end game of the ponzi as actual theft and blatant fraud rule now....

Tue, 03/29/2011 - 15:03 | Link to Comment RobotTrader
RobotTrader's picture

All I can say is that the gold bugs must be pulling their hair out watching the vast underperformance today.

Tech stocks like FFIV and QCOM up 3% - 4%, even that dog FSLR is catching some bids, but the GDX has barely moved with short sellers stomping on it every hour.

Tue, 03/29/2011 - 15:09 | Link to Comment unwashedmass
unwashedmass's picture

actually no. the CTFC declined to impose position limits. so we are watching JPM run the market again.

its actually a really good thing if you're looking for the hard stuff --- its a momentary pause when you might be able to locate some silver, at a somewhat reasonable premium.

so..its a sale day.....not a bad day. they have about played out their string here. Thursday night is the make or break, either JPM shows up with the 3M ounces of silver it needs to fulfill....or

it defaults.

so, anyone who knows what's going on is just sitting tight.

cause 3M ounces is a lot of silver, particularly if you've already drained SLV of its inventory.

Tue, 03/29/2011 - 15:31 | Link to Comment wandstrasse
wandstrasse's picture

sorry, educational question... so is Thursday some kind of d-day for the 'buy silver crash jp morgan' thing? or is this every end of quarter? Is there a figure xyz like - 'when silver price on Thursday is > xyz, JPM/Blythe is f&'*)#d'?

Tue, 03/29/2011 - 15:34 | Link to Comment crazyjsmith
crazyjsmith's picture

I am sure the Goldbugs are not looking at underperformace through a needle point - as in one day. 

That is contradictory to what it means to be a goldbug. But asset managers and retail investors looking to cash in on commodities and gold prices, yes, they are pulling their hair out. 

Tue, 03/29/2011 - 15:02 | Link to Comment Sudden Debt
Sudden Debt's picture

and for every billionaire that "saves" 3 billion, the average goes up 1000$

 

Tue, 03/29/2011 - 15:03 | Link to Comment TheMerryPrankster
TheMerryPrankster's picture

An interesting time to live, eh?

Tue, 03/29/2011 - 15:05 | Link to Comment I am Jobe
I am Jobe's picture

Someone said leave the USA, i agree, take some Gold and Silver and leave for good. Buy a farm and enjoy life. USA is getting too crappy. The TV shows shows a different picture . lack of realism.

Tue, 03/29/2011 - 15:18 | Link to Comment Mr Anderson
Mr Anderson's picture

Where in this globalized World would you leave to?

Tue, 03/29/2011 - 15:32 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Good luck buying a farm outside the USA.  Heck, let property values continue to crash and buy a farm in the USA.  Then arm your staff (like I have done).

Tue, 03/29/2011 - 15:35 | Link to Comment Mr Anderson
Mr Anderson's picture

Already have farmland in the USA. The rub is protecting that farmland. What have you done to prepare your community? This is a topic we should all be talking about.

 

Tue, 03/29/2011 - 17:46 | Link to Comment Bobbyrib
Bobbyrib's picture

I would prepare mine like the government is preparing all those FEMA camps. It's going to be a bitch to get in or out.

In all seriousness, I would have barbed wire fences. I wouldn't bother with electric fences. Again if I knew how to farm...

 

Tue, 03/29/2011 - 21:41 | Link to Comment TBT or not TBT
TBT or not TBT's picture

So, Jobe, where are your property rights going to be better protected than here?    Know of some other countries where you can protect your own property, which has a low corruption index, and where property in primal in law???    Bueller?

Tue, 03/29/2011 - 22:09 | Link to Comment Mr Anderson
Mr Anderson's picture

New Zealand?

Tue, 03/29/2011 - 15:08 | Link to Comment buzzsaw99
buzzsaw99's picture

Is Hank Paulson's money included in that top chart?

Tue, 03/29/2011 - 15:10 | Link to Comment Silverhog
Silverhog's picture

Only reason gold & silver sat today because somebody forgot to flush the dollar toilet. Fiat will commence it downward spiral again shortly.

Tue, 03/29/2011 - 15:10 | Link to Comment Caviar Emptor
Caviar Emptor's picture

The inevitability of a bailout of US consumers is becoming clearer. Once the the WS guys have made their billions they'll become more concerned about the threat of populism. They'll need to appease the angry, impoverished masses. Hence further bumps to SNAP, unemployment, and eventually social security, medicare and housing subsidies. 

Tue, 03/29/2011 - 15:34 | Link to Comment LawsofPhysics
LawsofPhysics's picture

With more useless paper?  Bahahahahahahah.  What happens when there is NO fresh water or food (because either China bought it all, or Japan contaminated it all)?  What happens when a billion SNAP dollars can't buy you a gallon of milk?

 

BAhahahahahahahahahahaha! 

Tue, 03/29/2011 - 15:11 | Link to Comment lincolnsteffens
lincolnsteffens's picture

Personal consumption up .7%

Isn't that about the current real rate of inflation???

Personal incomes rising .3%

Seems to me at that rate income in fiat $s is rising but purchasing power is -.4%

 

Tue, 03/29/2011 - 15:14 | Link to Comment RobotTrader
RobotTrader's picture

Speaking of JPM, who would have thought this would end up being one of the stalwarts of the Dow?

Obviously, the benefit of insider information about market direction has been the key to JPM's success.

Including the minute to minute movements in PM prices.

My bet is that JPM will not have a single losing trading day the rest of 2011.

And whatever "toxic waste" is on their balance sheet will be hidden behind a magic invisible shield provided by the banking regulators.

Tue, 03/29/2011 - 15:40 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

You have crime envy; go mug an old lady and maybe you will feel better.

Tue, 03/29/2011 - 16:04 | Link to Comment depression
depression's picture

Gold has outperformed the Dow and S&P 500 for over 10 years in a row. Priced in Gold, the 'value' of the Dow and S&P 500 have lost money every year for over a decade. Priced in Gold, the Dow is down more than 70% in a decade.

One day soon, the price of gold and the Dow will reach parity, where 1 ounce of gold will equal the Dow Index. Mark it down, tattoo it to your forehead, it will happen 100% guaranteed.

Please carry on with your end of day cherry picked chart selections of stocks you never bought.

Tue, 03/29/2011 - 17:25 | Link to Comment jemlyn
jemlyn's picture

More buttons please, Tyler.  This one needs LMAO.

Tue, 03/29/2011 - 17:40 | Link to Comment Blano
Blano's picture

I'll go buy some.  That should tank it good.

Tue, 03/29/2011 - 15:20 | Link to Comment Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

This the new economy,where debt=wealth and only suckers hold cash,it has to be used for speculation,whether in property or stocks it matters not(the banks make money either way),if it isn't it will be vapourised by the inherent high inflation that comes with endless fiat money creation.But the growth of the money supply is what drives economic "growth" by the inflation of asset prices,with a never ending cycle of state supported bubbles.

People had better get used to it,because the people that really run the west's economic system are not going to relinquish control without a fight,and just because the fundamentals are becoming less tenable and the economic policies pursued in response to the ever deteriorating economic fundamentals appear more on the borders of insanity doesn't mean they cannot keep the game going a lot longer than many people think.They have the entire western worlds governments in their pockets,and short of mass rioting/civil war I can see this going on for decades.

Many people have predicted the demise of the Euro as a first stage in the collapse,I don't think for a minute that it will go.The people behind it have spent nearly fifty years forcing together the disparate populations and cultures of Europe,at first fooling them into believing them it was a zone for economic growth and trade,this has morphed into a transnational central bank that sets interest rates for the whole Eurozone and a European Court that has dominance over individual countries laws and courts,making their laws,economic policies and sovereignty irrelevant.Every country in Europe has been flooded with third world economic migrants in a long term programme of ethnicnally cleansing the indiginous population,with any detractors or protestors being labelled as "racist" or threatened with prosecution under draconian race hate legislation designed to quel any protests against the colonisation of their country by foreigners.This has resulted in the major cities of Europe being totally transformed and the indigenous citizens being made to feel "strangers in their own country",as they are increasingly driven from the inner cities where they and their ancestors were born and bred to the outskirts.

The ultimate aim of course is to destroy "national identity",as when the ethnic cleansing/colonisation of these countries reaches a point where the indiginous population is in fact the ethnic minority, the population as a whole no longer feels themsleves British/French/German/Swedish/Dutch etc, they are then"Europeans" and are thus much less likely to rail against any changes the European Government(ECB) wish to make to further enhance thier control over the population of Europe.

This game is far from over,as the economies of the west deteriorate further,the money printing and emergency legislation designed to control the increasingly militant populace will become more and more desperate,this is only the begining. 

Tue, 03/29/2011 - 15:53 | Link to Comment lincolnsteffens
lincolnsteffens's picture

"THE ULTIMATE AIM OF COURSE IS TO DESTROY NATIONAL IDENTITY"

Boy you got that one right. Mr. Obama is front running this one big time. He doesn't address the American people or speak before a joint meeting of Congress. He makes phone calls to world rulers and gets them to have the UN as the granting authority. After the fact he tells the American People what he wants them to know.

Sure, he is probably right about a mass civilian slaughter about to take place. Did the Pres. mention that this is the norm for most African nations and inter-tribal warfare? Did he mention that this is the norm for most Arab speaking nations or tribal groups?  Syria's previous Pres. Assad  leveled a City when there was too much protest. All inhabitants killed. Town leveled. End of problem.

If we don't demand and get a return to the laws and rights as stated in OUR NATIONS CONSTITUTION AND BILL OF RIGHTS without a fight it is a good as voting it out. Boy o boy, those One World Government conspiracy theorists are looking more and more correct.

Tue, 03/29/2011 - 21:44 | Link to Comment TBT or not TBT
TBT or not TBT's picture

Precisely.  As Obama explained to us, our military was "volunteered by" the UN and the Arab League, both dictator clubs.   He didn't lobby Congress at all, nor ask them.  This is typical of Europe's transnationalist elites. 

Tue, 03/29/2011 - 23:42 | Link to Comment trav7777
trav7777's picture

pissing on congress like that is a good way to lose what allies you used to have. These people have enormous egos and regard not being consulted as a huge slap.

Tue, 03/29/2011 - 16:17 | Link to Comment GDE
GDE's picture

Edit

 

Tue, 03/29/2011 - 16:13 | Link to Comment GDE
GDE's picture

The indigenous of Europe will soon be robbed of their lands and parked in reserves like Native Americans or massively killed if they refuse to mix or convert to islam. We are already persecuted by our own governments. We have no freedom of speech. Our culture, religion, traditions are mocked and ridiculed. If we defend ourselves, they put us in prison or destroy our social lives. The Third World immigrants in our countries have more rights than we do.

It makes me feel so depressed to be unable to do something to stop this mass genocide.

 

Tue, 03/29/2011 - 15:21 | Link to Comment TrustWho
TrustWho's picture

...our great government told us we are a service economy and manufacturing is someone elses job. government told us globalization would be good for Americans...don't worry. Well, baby boomers spent their money and now have nothing. House is worthless, no savings, so they hope mommy and daddy will bail them out.

Government told us want we wanted to hear and they LIED!

Tue, 03/29/2011 - 15:44 | Link to Comment crazyjsmith
crazyjsmith's picture

I actually deal with the middle class boomers all day, and they largely have no debt on their house, have saved, have also lost, and are the last of the pensioners.  It is the demographic of those behind the boomers that are going to feel the full force of this hit.  You would be shocked at how many Boomers plan on spending every dime in retirement with ZERO intention on leaving anything behind to their unemployed, foreclosed on, children.  Their stacking pensions and taking social security early.     

Tue, 03/29/2011 - 16:07 | Link to Comment depression
depression's picture

They are practical. You can't take it with you. The money is worthless anyways, either spend it now or give it to the medical system. The kids are going to have to start over from scratch with an entirely new global economic and political system. I wish them the best of luck.

Tue, 03/29/2011 - 16:10 | Link to Comment Kat
Kat's picture

I'm not shocked at all.  The death tax means that they'll be leaving it mostly to government.  After the lawyers and the government take their cut, there will be little left for the offspring.  They'll probably (prudently) disgorge some of the wealth to their kids during their lifetime, enjoy what time they have left and spend the rest on medical treatments abroad once Obamacare has ravaged the U.S. system.

People respond to incentives.

Tue, 03/29/2011 - 16:19 | Link to Comment lincolnsteffens
lincolnsteffens's picture

Most baby boomer's parents and deffinately their grandparents went through the last depression. I certainly learned a very strong lesson about financial sanity and temptation. When Citi Cards sent me a $50,000 check in the mail to spend on whatever I wanted ( fine print says you gotta pay us back ) it got shredded with out ANY hesitation.

When I first heard about home equity loans I thought the banks were promoting foolish behaviour and would like to take your always-rising-in-value home when you couldn't pay. Well I still think that was part of the Big Bank plan so now they got what they deserve, an always-decreasing-in-value home. If they couldn't get your home at least you would be in perpetual servitude to them.

That is how I think as a 64 year old still working boomer. I'm damn lucky I had the family know how. Not only that but I don't plan on retiring. I'm still splitting my firewood by hand. I don't regret one bit of denying myself luxuries I hadn't earned.

Tue, 03/29/2011 - 16:43 | Link to Comment aerojet
aerojet's picture

You're 64 and still working which means you refuse to get out of the way to let anyone else in. 

Tue, 03/29/2011 - 17:00 | Link to Comment lincolnsteffens
lincolnsteffens's picture

Gosh, I never thought I was stealing anyone's job. I know, you probably want to buy my money losing business so I can retire. I also have a bridge in Brooklyn you might like.

Thu, 03/31/2011 - 21:08 | Link to Comment BigJim
BigJim's picture

Don't worry about Aerojet - he suffers from the 'lump of labour fallacy'

http://en.wikipedia.org/wiki/Lump_of_labour_fallacy

Read an economics book, Aerojet - I promise you won't regret it. Thomas Sowell's Basic Economics is pretty good, and will help you avoid making similar embarrassing gaffes.

Tue, 03/29/2011 - 18:52 | Link to Comment ZapBranigan
ZapBranigan's picture

Aerojet, four letters for you: STFU

Tue, 03/29/2011 - 15:27 | Link to Comment zaknick
zaknick's picture

Poetic justice, bitches. You bankster and their Zionist masters loving motherfuckers are in for a rude awakening. Now you will feel what the banksters have inflicted upon us with your redneck "empire"!

Tue, 03/29/2011 - 15:35 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Spot on.  Know your neighbor.  Your survival will depend on it.

Tue, 03/29/2011 - 16:28 | Link to Comment lincolnsteffens
lincolnsteffens's picture

Poetic justice, bitches. You bankster and Christian masters loving motherfuckers are in for a rude awakening. Now you will feel what the banksters have inflicted upon us with your redneck "empire"!

Hey, Zelnickstein did you just crawl out of a cave?? How do you get the idea that banksters are rednecks?? What are you snorting fool?

Tue, 03/29/2011 - 15:27 | Link to Comment TraderMark
TraderMark's picture

Amazing the saving rate is not higher when so many Americans don't even bother to pay the mortgage anymore.  That should be $15K a year into their pockets, risk free - thanks to a ponzi scheme. :)

 

1 in 3 defaulters have not made a payment in 2 years, 1 in 2 in 18 months or more. 

http://www.fundmymutualfund.com/2011/03/nearly-13rd-of-home-owners-in-us...

Thu, 03/31/2011 - 21:11 | Link to Comment BigJim
BigJim's picture

Maybe that's why AAPL is doing so well.

Tue, 03/29/2011 - 15:55 | Link to Comment guasilas
guasilas's picture

Save for what if interest rates are at 0 and inflation is demolishing the currency.  Behaving responsibly has been destroyed as a valid form of behaviour by M. Bernanke, and before him by M. Greenspan's policies. 

Tue, 03/29/2011 - 16:00 | Link to Comment tiger7905
tiger7905's picture

On top of all this it appears in 2011 is when more than 50% of a state's revenue will come from Federal Aid.

http://goldandsilverlinings.com/?p=385

Tue, 03/29/2011 - 16:00 | Link to Comment mind_imminst
mind_imminst's picture

I used to be a saver up until the crash in 2008. Now "savings" accounts at most banks are only a fraction of a tenth of 1 percent, if that. CDs were pulling down nearly 5% before the crash. Now you are lucky to get 1.5%. Government Bonds? Hahahahahaha. Now I trade in order to make money. The Fed and US Gov are crushing savers. I know most ZH'ers think it is on purpose.

Tue, 03/29/2011 - 16:05 | Link to Comment Kat
Kat's picture

I guess you're not a Keynesian dweeb then, Tyler!  Good to know. There's nothing Keynesians hate more than the Americans deferring consumption until they choose and only current investment counts.  In the long term we're all dead, don't you know? Ugh.

Tue, 03/29/2011 - 16:05 | Link to Comment Kat
Kat's picture

I guess you're not a Keynesian dweeb then, Tyler!  Good to know. There's nothing Keynesians hate more than the Americans deferring consumption until they choose and only current investment counts.  In the long term we're all dead, don't you know? Ugh.

Tue, 03/29/2011 - 16:15 | Link to Comment Truthiness
Truthiness's picture

A little off topic, but general interest question - trying to learn more about this community:

What do some of you do for a living and how old are you? 

Tue, 03/29/2011 - 16:38 | Link to Comment claycalhoun
claycalhoun's picture

Really boring but I am retired, but this is a great site.

I am a brit based in the uk

Tue, 03/29/2011 - 16:43 | Link to Comment lincolnsteffens
lincolnsteffens's picture

Antiques dealer, 64. No income from that anymore but the sign still says OPEN. I'm working most of the time on making sure my nest egg goes up in value and ZH is a help. I started buying more sterling silver too, both antique and for scrap. When I get enough scrap flatware I'll sell it and take gold coins and junk silver coins instead of cash. I pay 20% less than the scrappers for junk. For good early sterling I pay what a seller would get after the auctioneers commission. I believe in treating people fairly and I tell them I'm buying at a 20% discount and if they want to try to set up an account, pay for shipping, insurance and waiting for a check they are welcome to take the stuff home and do it themselves. So far they have all sold to me.

I don't need to steal from anyone. I just want to make a living.

Tue, 03/29/2011 - 16:52 | Link to Comment lincolnsteffens
lincolnsteffens's picture

Oh, I forgot to mention... I practice no religion but I and all my stinking money grubbing sleazy slime bankster loving relatives are what the pious Christian bald headed tattoo sporting Neo-Nazi's like to call cabalist jooos  who are plotting to take over the world. BITCHEZ!!!!!!!!!!!!!!!!!!! I do all that plotting in my spare time cause it is soooooooooo easy.

Tue, 03/29/2011 - 16:35 | Link to Comment claycalhoun
claycalhoun's picture

The beginning of the end of a super power, the US is bust and it will take many steps backward over the next 10 years, with China & India taking the space?

The US has contributed greatly to the free World but it's days are coming to an end, we understand the British Empire had to go through the same trauma.

Our problem was we conicided with the rise of the welfare state and socialism, hopefully for your sakes those days are also in decline.

But decline is a tough and uncomfortable experience!!

Tue, 03/29/2011 - 17:16 | Link to Comment falak pema
falak pema's picture

Why is the welfare state a sign of decline? It is a much better situation than a cheating, thieving economy in the name of free market innovation; which is the facade of bubble-nomics and Oligarchy rule. Maybe we need a new paradigm which puts human values in some domains at par with economic values in others; a qualitative shift which negates the supremacy of productive economics from certain domains of human activity. Can we imagine a world with a different paradigm where economic marginal efficiency is NOT the criteria for determining optimal distribution of resources, but a more complex criteria involving socio economic constraints? Even ecological ones if these permit to limit transgression of certain global ceilings from toxic emissions. We should be open to game changing rules at crucial cross-roads of civilizational tipping points. And we may be at one.  

Tue, 03/29/2011 - 18:09 | Link to Comment claycalhoun
claycalhoun's picture

Open to game changing rules ? Yes if it does not mean we are in the hands of politicians, who give the people no choice, and leave us with our money badly spent and a 3rd rate service.

 

A Welfare state guarantees decline, we have had 60 years of it and have witnessed an inexorable decline over this period, believe me I have seen the decline for myself. People's self respect and pride is undermined, their honesty and morals are exploited.

 

You end up with a client state driving fast towards a socialist state in the image of the USSR.

 

Believe me it is not what you want for a decent society.

Tue, 03/29/2011 - 17:09 | Link to Comment SqueekyFromm
SqueekyFromm's picture

But maybe this is all backwards. Maybe all the Baby Boomers retiring is a good thing. One, you should have a lot of jobs opening up. Two, you start to free up some of the money that has been socked up in the 401K and Pension Mattresses, where I wonder if they have distorted stuff. As the money comes out of the mattresses, then you should see a pick up in demand.

Squeeky Fromm, Girl Reporter

Tue, 03/29/2011 - 17:17 | Link to Comment falak pema
falak pema's picture

Gal, you can count!

Tue, 03/29/2011 - 17:49 | Link to Comment Blano
Blano's picture

Still packin' heat, missy??

Tue, 03/29/2011 - 18:18 | Link to Comment AGuy
AGuy's picture

Unlikely, It was the boomers are doing the bulk of the spending. When they retire they'll go frugal because they will be living on a limited fixed income. When Boomers start drawing on their 401K, in mass, stock market\bond will tank as they cash out of investments.

 SS and Medicare are both running in the red and when the bulk of boomers retire it will shift over then next several years from red to infrared (ie infrared is below red) forcing the gov't to print massive amounts of currency to pay for it. At the same time, the gov't (federal, state, local) will be forced to raise taxes to draconian measures on the working class. This will kill the economy and tip into hyper-inflation, with stagflation as incomes will not keep up with inflation. Watch as the cost of food and energy soar to 50% to 75% of working class incomes. The Majority of X-Y and Millennial generations will suffer deep poverty not seen since the Great Depression. No way entitlements will go away, since Boomers are the largest voting block and will simply out-vote the rest of the population in order to keep entitlements alive.

On top of that we are about to enter a period of liquid energy crunch as the existing cheap oil fields deplete, causing the end of the green revolution and bringing forward  war, famine and pestilence not seen since the dark ages.

Finally Don't blame boomers for holding on to jobs. Its much harder for boomers to hold on to jobs, because, they are much more expensive (higher medical costs, higher salaries, and usually more vacation time) than the younger generations. The reason why younger generations can't replace boomers is poor work ethics, poor skills, and lack of attention to details. Most employers would dump their older workers in a heart beat if they could find cost effective replacments.

Tue, 03/29/2011 - 22:31 | Link to Comment Mr Anderson
Mr Anderson's picture

Great post-

how about we let the dow drop to 3000. 

Then we don't have to worry about you taking money out of your 401 and other investments.

Then you can keep working until you die which i'm sure helps keep the engine efficient.

/sarc

Tue, 03/29/2011 - 17:24 | Link to Comment myTPisUSD
myTPisUSD's picture


Big Lebowski Edit:

Tommy was a good politician, and a good man; he was, he was one of us. He was a man who loved architecture, and freedom. And as an enlightenment follower, he explored the aspects of maintaining and protecting freedom, from Virginia to Paris, and up to....D.C. His vision is dying....His vision is dying as are many young men of his generation before his time. In your "wisdom", America, you took his vision away...Like you took so many away with Jersey Shore, Dancing with the Stars, and The Hills Season 3 episode 64. These young men are sacrificing their chance at future liberty, and so is Tommy's vision being sacrificed. Tommy who loved freedom. And so, Thomas Jefferson, we release your immortal disposition to the roots of the Tree of Liberty, which you loved so well, let us hope one day it will prosper. Good night sweet prince.

Wed, 03/30/2011 - 08:24 | Link to Comment blindman
blindman's picture

.

Tue, 03/29/2011 - 17:38 | Link to Comment blindman
blindman's picture
Mortgage Finance Association of Australia Talk

on  at 7:21 am
Posted In: Debtwatch

http://www.debtdeflation.com/blogs/2011/03/20/mortgage-finance-association-of-australia-talk/

.

savers swamped to death ,  contents of pockets removed.

Tue, 03/29/2011 - 17:37 | Link to Comment Stuck on Zero
Stuck on Zero's picture

The Feds groan about American's not saving enough.  Gee, let's see why?  The Fed undercut savers in interest so that all we can earn is a paltry 0.5% interest.  The Feds let Wall Street rape investors so they've ruined that investment opportunity.  If our investments stay still wrt inflation we are taxed for it!  If we save by investing in real estate the Feds bankroll your competition with nearly free money to destroy your savings.  The Feds allow foreign countries to destroy our jobs and factories so there's no reason to invest there.  All in all, buy PMs.

Tue, 03/29/2011 - 18:23 | Link to Comment AGuy
AGuy's picture

The Fed isn't groaning about the lack of americans saving. They want Americans to do the opposite, spend! spend! spend! in order to get the economy moving again. They lowered the interest rates to stoke inflation so that people with saving will go out as spend every last dollar they have.

Tue, 03/29/2011 - 19:15 | Link to Comment AhhhItBurns
AhhhItBurns's picture

+

 

 

There are far too many distractions to keep people entertained even when situations worsen. We have access to distractions at all points during the day provided by phone, tv, computer etc.

 

We have:

An aging percentage of the population

Healthcare cost lunacy

Generally bad health habits

Major entitlement spending issues

Energy issues related to both cost and long term viability

Food which is idiotically transported cross country

Agriculture market which will stop in its tracks if major oil disruptions occur

Upward trend of commodities

Higher education costs which are distorted beyond belief

Job prospects in the shitter for even the best students

National income distribution which is worst among industrialized nations

Kids leaving k-12 school with a terrible education

State govs cutting education and raising corrections funding

Defense spending (ra-ra-ra f-35!)

Generalized hate, but secret admiration, of wall st. players

 

I've got more, but, I gotta catch Idol...

 

 

 

Tue, 03/29/2011 - 18:45 | Link to Comment JR
JR's picture

Here’re ‘just the hard, cold facts, ma’am” posted yesterday on “Personal Income and Outlays: February” by Karl Denninger…

 Eh, headline or internals?  Pick one.

Personal income increased $38.1 billion, or 0.3 percent, and disposable personal income (DPI) increased $36.0 billion, or 0.3 percent, in February, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $69.1 billion, or 0.7 percent.  In January, personal income increased $147.4 billion, or 1.2 percent, DPI increased $92.0 billion, or 0.8 percent, and PCE increased $29.5 billion, or 0.3 percent, based on revised estimates.

Remember that the January number was dramatically boosted by the tax changes for FICA.  That sounds good except that it flows directly to the deficit - that is, we're simply kiting checks.  Now that one-timer has gone through the system.

How's it working out for consumers when one looks at actual purchasing power?

Real disposable income decreased 0.1 percent in February, in contrast to an increase of 0.5 percent in January.  Real PCE increased 0.3 percent, in contrast to a decrease of less than 0.1 percent.

The one-timer in January masked what was otherwise an 0.3% decrease.  Now it's gone.  The money-printing simply shifted where the negative number showed up - in this case, on the government balance sheet.  But again, that was a one-time deal and now the impact has been taken, and in February we got to see the impact of an actual decrease in purchasing power.  The "make me feel richer" attempt from that tax change, however, did result in a bump in spending.  Remember, this is February - before all the fund in Libya, Japan and elsewhere.

The January change in personal contributions for government social insurance reflected the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which temporarily decreased the social security contribution rate for employees and self-employed workers by 2.0 percentage points for 2011, or $105.4 billion in January.

WHAT?!  $105.4 billion in change in tax receipts in one month?   Please tell me I'm reading this wrong - I thought the CBO said this change in the tax code was a $400 billion deficit addition for the full year.  How did we get over a hundred billion in one month?  That can't be right - that would be close to half of the entire federal income and social insurance tax receipts from this one change!  If this is anything close to correct we're in much more trouble than I had first thought in terms of tax receipts and deficits.  My current estimate is about $2 trillion for Calendar Year 2011; this would boost that to near $2.5 trillion! 

PCE price index -- The price index for PCE increased 0.4 percent in February, compared with an increase of 0.3 percent in January.

Oh that's nice - headline inflation of about 5% eh?  That ought to make people really, really happy.  NOT.

Watch those tax numbers folks.  If that value is anything close to correct we've got a monster problem coming at us later this year with deficits and the arm-waving nonsense coming from Congress about $60 or $100 billion in "spending cuts" are going to do exactly nothing, as revenue decreases from the tax change is going to swamp that figure by a factor of ten.

http://market-ticker.org/akcs-www?blog=Market-Ticker&page=2

 

Tue, 03/29/2011 - 22:41 | Link to Comment TwoShortPlanks
TwoShortPlanks's picture

The last time I thought of any Western Economy as an 'Economy' and not an 'Iron Lung' was three decades ago.

What we're seeing, IMO, is the Iron Lung breaking down, the 'Economy' left the building long ago. In a very real sense, we're actually seeing the errosion of the 'Welfare State', which is of course the leftovers of the real economy.

Sorry, but it's fucking true.

Do NOT follow this link or you will be banned from the site!