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Consumer Taps Out As Income Plunges By Most In 20 Years: Savings Rate Crashes To 2007 Levels

Tyler Durden's picture




 

When the US income and spending figures for December came out, the punditry couldn't contain their exuberance following the massive surge in income which as we explained was merely a function of the pulled forward wages and bonuses in December due to fears of what the Fiscal Cliff and the expiration of the payroll tax cut would do to incomes in 2013 (nothing good), as well as a surge in stock dividends to avoid a dividend tax hike resulting in yet another boost in income. The spike in personal income without an offset in spending sent the savings rate to the highest in three years.

Today it's payback time as moments ago we learned that the US consumer gave back all the December gains and then much following news that while spending did nothing, and came in as expected at 0.2%, personal income imploded by 3.6% on estimates of a modest 2.4% drop. This was the biggest drop in personal income in 20 years just as the US consumer's confidence was soaring at least according to such manipulated aggregators as UMich. What this also led to was that not only is the stock market back to 2007 levels, but so is the personal saving rate, which crashed from 6.4% to 2.4%, the lowest since November 2007, and leaving Americans with the least purchasing power just as the full impact of a government that is flirting with austerity is starting to be felt.  And just as bad was the material 4% pullback in real
disposable personal income or adjusted for inflation.

"Consumers can’t spend what they don’t have, and they don’t much much,” summarized Bloomberg economist Rich Yamarone.

Just don't tell the TV talking heads on financial comedy TV for whom the only thing that matters is how high two algos can chase the hot potato known as the Dow Jones Industrial Average. .

 

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Fri, 03/01/2013 - 10:29 | 3289839 khotel
khotel's picture

I am Jack's complete lack of surprise.

Fri, 03/01/2013 - 10:29 | 3289841 Oh regional Indian
Oh regional Indian's picture

"American Savings Rate" is an oxymoron.

ori

Fri, 03/01/2013 - 10:33 | 3289856 Spastica Rex
Spastica Rex's picture

As an American, I don't know what "oxymoron" means. I also don't know what a "sequester" is. I am very relieved that we avoided the fiscal cliff, however! THAT was scary. Although I don't really know what "fiscal" is, I know that cliffs are dangerous.

Fri, 03/01/2013 - 10:40 | 3289877 Oh regional Indian
Oh regional Indian's picture

Well SR, let me simplificate it for u.

When the buyson was run off the cliff, fisically speaking, it was an ox being a moron.

By the way, as a teacher (former) have you ever wondered why you had to do your less-ons so you did not become a more-on?

Eh?

;-)

 

 

Fri, 03/01/2013 - 10:53 | 3289948 Spastica Rex
Spastica Rex's picture

It seems to me that in a society built upon desire-based consumption, that it's important to dis-educate the citizenry. Otherwise, producers run the risk of consumers questioning marketing, and questioning the actual value of purchases, rather than reflexively buying whatever shows up on the boob-tube, or on billboards, or on teh interwebs.

Marketing works best with morons.

Fri, 03/01/2013 - 16:16 | 3291408 Totentänzerlied
Totentänzerlied's picture

That has less to do with education and more to do with emotion, as in the emotional control necessary to defer gratification and resist temptation, education alone can't change a person's time-preference. It's why we have such enormous prefrontal cortices, if only we would use them

Fri, 03/01/2013 - 10:54 | 3289952 Jim in MN
Jim in MN's picture

And if the ox should be fiscally cut, that would be a gore-on.

But don't think too much; you might get a hard-on.

Fri, 03/01/2013 - 10:31 | 3289845 SheepDog-One
SheepDog-One's picture

Cut me Ben...cut me...and hand me some FREE MONEEZ I'm going back in!!

Fri, 03/01/2013 - 10:32 | 3289855 wonderatitall
wonderatitall's picture

LIES, ALL LIES, THOSE WHO WISH TO TELL THE TRUTH OF OBAMA AND THE GOOBERMINT SHALL BE DRONED...BITCHEZZ. EVERYTHING IS GOOD. ICE CREAM AND CAKE FOR ALL. OUR DEAR LEADER WANTS YOU TO KNOW HIS TRUTH....ITS BUSH AND ROMNEY'S FAULT. THANK YOU FOR YOUR ATTENTION...WASHINGTON BOB OVER AND OUT

Fri, 03/01/2013 - 10:34 | 3289859 1eyedman
1eyedman's picture

...american savings rate 'oxymoron', funny.   its b/c americans have been told for so long that when they spend they 'save'.  i bought a new iproduct, it was marked down $100, I saved $100!

 

wsj big article on how consumers are starting to borrow again (perverse effect of wealth effect?: maybe i'll make money in the future, so i'll borrow now)  but this data points out borrowing increased b/c income went down.   no wonder why banks dont lend, they know there is less income out there to support detbt payments...only lend to borrowers who can print their own money

Fri, 03/01/2013 - 10:35 | 3289862 venturen
venturen's picture

Can we count more debt as saving? If Ben prints another $85 Billion and the bankers put it in their bonus pool and then their bank account...is that personal saving? Of course no fool banker would actually leave his money in a US based account....we should count the Caymen Island and other offshore wonderlands for personal savings! 

Fri, 03/01/2013 - 10:45 | 3289890 diogeneslaertius
diogeneslaertius's picture

America: Destroyed By Design - 1998 - -

 

nice procedural breakdown in article and comments all

Fri, 03/01/2013 - 10:44 | 3289891 nantucket
nantucket's picture

didn't it jump in Dec 2012 as people were pulling forward divs and cap gains to avoid higher 2013 rates? IIRC it's been a weird 2 months because of that.

Fri, 03/01/2013 - 10:47 | 3289907 CheapBastard
CheapBastard's picture

Why save when you can buy another iSomething on EZ-credit (and then never pay).

Fri, 03/01/2013 - 10:49 | 3289923 Inthemix96
Inthemix96's picture

We have here old folk on the standard state pension, paid for over their entire lives sitting in shopping centres, buses and cafes to keep warm.

They dont have the money to heat their homes so go around all day keeping warm at above type locations, my mother knows of an old lady in exactly this predicament.  She couldnt afford to eat otherwise.

When are we as a fucking species going to stop this?  On a different note, when the 2008 crisis hit home here, I lost around 40% of my work in under six months.  We are being crucified on the altar of greed.

This cant, and wont, end well.

 

Fri, 03/01/2013 - 11:28 | 3290092 Bingfa
Bingfa's picture

Greed has just exhausted the possibilities...

It's come to it's logical conclusion

There's nowhere to go from here.

We need to go back to go ahead.

Fri, 03/01/2013 - 16:24 | 3291438 Totentänzerlied
Totentänzerlied's picture

Simple solution. The elderly move back in with their kid(s). They contribute most of their assets, if any, to household costs, they babysit, cook, clean, sew, run errands, whatever they are capable of. This is how things were everywhere, and still are in many places. The mortgage bankers and car makers and credit pushers will have a shit-fit because granny is no longer being a good maximally consumptive consumer and the whole family is saving serious money and making much more efficient use of their resources... well, who cares?

Fri, 03/01/2013 - 10:52 | 3289939 Jim in MN
Jim in MN's picture

It's like, barf out, gag me with a spoon....

Fri, 03/01/2013 - 10:54 | 3289953 Cheeseus Sonofdog
Cheeseus Sonofdog's picture

Bogus numbers based on bogus calculations. Does anyone really believe inflation is only 1.3% year over year? Meaning what we buy has gone up a mere penny or two since this time last year?.... Consumers are trying to buy their same basket of daily essentials but paying much more for them. Because of under-reported inflation they are now forced to tap into their savings and credit. Since we are still a consumerist economy, lying about stagflation is how we end up getting a deflationary collapse. 

Funny how people think the minimum wage should be $9.25 but haven't noticed that Obama cut their own wages in half. Prices have doubled since he took office. That is a 50% pay cut we all took. Screw the unemployed and low wage earners. The outrage should be among the working. We have become serfs!

Fri, 03/01/2013 - 10:57 | 3289968 Jim in MN
Jim in MN's picture

Doug Short updates these charts every month.  And you can easily use the ShadowStats or your own inflation adjustment if you like.  It just makes it worserer :*).

 

http://www.advisorperspectives.com/dshort/charts/indicators/DPI-overview...

 

 

Fri, 03/01/2013 - 11:08 | 3290014 Taffy Lewis
Taffy Lewis's picture

Agreed, Cheeseus.

My family's rate of savings is way down so far in 2013. The frog in a slowly boiling pot of water is in full effect. And I hate being the fucking frog.

Fri, 03/01/2013 - 10:56 | 3289964 edifice
edifice's picture

It's okay, consumers; the government will spend it for you, and then some...

 

All anyone has to do is pull up FRED and graph government debt vs household debt, to see the real picture.  Consumers are "deleveraging" (going bankrupt), while government debt has taken on an exponential curve upward.

Fri, 03/01/2013 - 11:09 | 3290006 Element
Element's picture

OT: 

Funny stuff. The new Jewish pro-Zionist US Sec-of-State, John [Cohen] 'Kerry' (his family name is in fact Cohen, not Kerry), quickly demonstrated how diplomatically inept he is, and how even-handed he isn't going to be. An honest-broker? Not a chance! But how unsurprising, but how stupendously dumb ... or alternatively, ... intentionally malicious is his appointment.

--

Kerry to express dismay at Erdogan's statement on Zionism at meeting with Turkish PM, U.S. official says
 
By Barak Ravid    | 12:52 01.03.13 | 11
 
As Secretary of State John Kerry lands in Ankara, senior American official says Erdogan's equation of Zionism with fascism has 'corrosive effect' on U.S.-Turkish relations; UN secretary-general expresses disappointment with 'divisive' comments.

http://www.haaretz.com/news/diplomacy-defense/kerry-to-express-dismay-at...

--

Immediately followed by a much more dangerous (and aggressively foolish) act that will have real and material consequences to come. And remember, the PKK just made an impromptu peace and withdrawal agreement with Turkey ... so guess where they will be setting up their UN-approved "Kurdistan" state?

Yup ... in northern and eastern Syria instead. So the PKK are now fully in on the war, but really, they have been all along. Does anyone think the rest of Syria, or Russia, or Iran, are going to let this deal stand? Does anyone think Iraq will be 'stable' after such Turkish and US-backed Machiavellian deals and armed support to bring it about?

Talk about lighting a fuse under a regional suicide bomb. Turkey may think they're losing the PKK enemy and security threat, and paying Damascus back as well, but their sense of peace-in-our-time, can definitely be removed by concerted direct action within Turkey itself.

--

Russia condemns U.S. decision to aid Syrian rebels
 
By The Associated Press    | Mar.01, 2013 | 2:16 PM
 
Foreign Ministry spokesman Alexander Lukashevich denounces Obama administrations move, cites concern for 'inevitable sufferings of ordinary Syrians'

http://www.haaretz.com/news/middle-east/russia-condemns-u-s-decision-to-...

--

Oh yes, US Foreign Policy is in a safe pair of hands there, you can just imagine the incredible mess this guy is going to ferment in the ME if he serves the full term with the Obomba Admin. I confidently predict US diplomatic credibility, strategic leverage and military circumstance will steadily degenerate and decay from here. Talk about installing the completely wrong guy for this crucial US role.

The now open-plotting to tear Syria apart, has certainly thickened.

Fri, 03/01/2013 - 12:34 | 3290439 lakecity55
lakecity55's picture

...and the new SECDEF will see to it the military is FUBARed allowing the Republic to be attacked.

Fri, 03/01/2013 - 13:32 | 3290818 Element
Element's picture

I'm pretty sure the decades of non-budgeting and deficits greater than REAL GDP growth is what will produce that outcome in this predictably disastrous Obuma Admin v2.0. ;)

Fri, 03/01/2013 - 15:50 | 3291306 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Assad retreats to an Alawite base centered around Tarkus protected by Russia so they get their Med port. Sunni and Shia carve up the rest, along with the PKK. Turkey is glad to have a PKK homeland they can go to. Germany turns its back on Anglo-American bankers and lines up with Russia and China. America sits on its thumbs wondering WTF just happened there.

Fri, 03/01/2013 - 11:15 | 3290039 slingblade
slingblade's picture

We're on the road to surdom ! I am sure the moonbat regime aparatchics in the MSM will cheer the fact that spending is up !!!! FOOLS ! All of them...

Fri, 03/01/2013 - 12:16 | 3290331 JohnGaltsChild
JohnGaltsChild's picture

So that's the road they been kicking it down?

Fri, 03/01/2013 - 11:20 | 3290059 Shizzmoney
Shizzmoney's picture

We are in an income crisis.  Neither party will admit it because they are paid by the corporations that benefit from it.

This thing deserves to end in a ball of flames. 

Fri, 03/01/2013 - 11:21 | 3290063 Billy Shears
Billy Shears's picture

Mission Accomplished!

Fri, 03/01/2013 - 12:15 | 3290325 JohnGaltsChild
JohnGaltsChild's picture

The one and only??

Fri, 03/01/2013 - 11:22 | 3290064 CaptainSpaulding
CaptainSpaulding's picture

I went to Don's carwash this morning. There were 8 cars ahead of me. Blue horseshoe loves Don

Fri, 03/01/2013 - 11:55 | 3290194 alfbell
alfbell's picture

 

 

It's deja vu all over again!

(Recalling a previous lifetime when I was a citizen of the Roman Empire. Man never changes, only his technology does.)

Fri, 03/01/2013 - 11:57 | 3290218 Crash Overide
Crash Overide's picture

I know exactly where my disposable income has gone and it's not to fucking Walmart.

Still long ammo, gardens, silver, and booze.

Just saying.

Fri, 03/01/2013 - 12:30 | 3290416 rlouis
rlouis's picture

We just discontinued our newspaper subscription which we've had for 20 continuous years.  Was it becasue of income or the unbelievable propaganda?  I won't tell, but I think it had to do with the latter.

Fri, 03/01/2013 - 12:41 | 3290487 rlouis
rlouis's picture

Sequester madness - it's contagious

Fri, 03/01/2013 - 12:32 | 3290429 rosiescenario
rosiescenario's picture

"Consumers can’t spend what they don’t have, and they don’t much much,”

 

.....no problem there, just take out a second.......oh, you say you already did that....maybe going vegan would cut some costs?

Fri, 03/01/2013 - 13:58 | 3290917 wstrub
wstrub's picture

Why are the credit cards rates at usuary levels????????

Fri, 03/01/2013 - 15:05 | 3291168 JohnGaltsChild
JohnGaltsChild's picture

Could it be that Americans are stupid?

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