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Chart Of The Day: Savings Rate Drops To December 2007 Levels

Tyler Durden's picture




 

Wondering how it was possible for Q3 GDP to post such a substantial beat yesterday driven by a surge in Personal Consumption expenditures? Wonder no more: in the last quarter, the US consumer literally tapped out, bringing their savings rate from a 2011 high 5.3% in June to 3.6% in September, after the BEA reported that while spending increase was in line with expectations at an unsustainable 0.6%, income was just barely above unchanged at 0.1% on expectations of 0.3% confirming that as far as the economy is concerned, the consumer is just getting worse and worse off. This is the lowest number since the depression started back in December 2007! The only problem is back then it had been lower and was rising in anticipation of the fallout from the Great Financial Crisis, this time it was modestly higher and is now plunging. Very soon deleveraging Americans, whose homes are getting cheaper by the day, will have no savings left to use for useless trinket purchases. How does GDP "grow" then?

 

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Fri, 10/28/2011 - 08:44 | 1820380 EscapeKey
EscapeKey's picture

How does GDP "grow" then?

Well, the foreclosure sign business is booming.

Fri, 10/28/2011 - 08:50 | 1820402 cossack55
cossack55's picture

How does GDP "grow" then?

BLS math. Voila'.

Fri, 10/28/2011 - 09:37 | 1820541 Nobody special
Nobody special's picture

I must be an idiot, because I too don't get this.  On one hand, we're told the economy is weak (dying) because people aren't spending, but then you see stats like this that say people are blowing through their dry powder as fast as they can.  Which is it? 

If people are already spending at peak, then this slow downwards crawl is probably a best case scenario, and worse is coming.

If people are paying down debt, then we have a contraction as we move to greater financial stability.

It can only be one... which is it?  I believe it's the first, in which case... look out below!

Fri, 10/28/2011 - 09:02 | 1820443 junkyardjack
Fri, 10/28/2011 - 09:17 | 1820488 Mitch Comestein
Mitch Comestein's picture

Resume business is  booming as well.

Fri, 10/28/2011 - 08:47 | 1820383 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

People save for a rainy day...

... and these days, under our fascist dictators, its p*ssing it down daily directly on to every citizen.

Fri, 10/28/2011 - 08:46 | 1820386 JustObserving
JustObserving's picture

Spend your money before it is worthless - it is earning 0% in the bank anyway. Bennie will be printing trillions soon enough anyway.

Fri, 10/28/2011 - 09:06 | 1820454 mayhem_korner
mayhem_korner's picture

 

 

If you replace "spend your money" with "convert your money to something that holds value" then I agree with you.

Fri, 10/28/2011 - 10:28 | 1820709 s2man
s2man's picture

Agreed.  10% of my income goes to "savings".  But it gets converted to items of value as quickly as possible. Hence, I help drive the statistics of lower savings and higher spending.

Considering the 11% inflation rate (ref. shadow stats), buying just about anything you will need in the future, now, will get you one of the best returns around.

Fri, 10/28/2011 - 08:46 | 1820387 NetDamage
NetDamage's picture

There is savings and then there is SAVINGS - GOLD, bitchez!

Fri, 10/28/2011 - 11:17 | 1820905 gdiamond22
gdiamond22's picture

Gold is about to make new lows along with the rest of the market.

Fri, 10/28/2011 - 08:51 | 1820391 firstdivision
firstdivision's picture

Well that does explain how the consumer was the biggest component in that surge in GDP 0_o 

Wait til it hits the near zero, like in 2005. 

On another note, how the fuck did Chevron miss revenues so much?

Fri, 10/28/2011 - 08:49 | 1820398 MFL8240
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Barack Obama is a perfect example of the stupidity in America, this recent report shows that nothing has changed. 

Fri, 10/28/2011 - 08:56 | 1820421 EscapeKey
EscapeKey's picture

Not that I disagree, but it's not exactly as if McCain/Palin was such a promising prospect.

Fri, 10/28/2011 - 09:57 | 1820608 Bob Sacamano
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Therefore, BHO is not stupid because Palin is stupid too.  What?

I would worry more about Palin if she was President or even had a reasonable chance to be President.  You are watching too much MSM.

Fri, 10/28/2011 - 11:14 | 1820893 EscapeKey
EscapeKey's picture

Way to go reading into what I clearly didn't say.

The choice was between Obama and McCain, that much is a fact.

As for your OMG YOU WATCH TOO MUCH MSM, what the fuck is that all about? I just stated the alternative wasn't exactly a grand prospect either.

Fri, 10/28/2011 - 11:32 | 1820968 Cruel Aid
Cruel Aid's picture

The party picked that ticket because they didn't want anything to do with this shit sandwich thru 2012. Now they are clearly picking Mitt.

Take your pick, it's a shit sandwich with different condiments.

Fri, 10/28/2011 - 08:49 | 1820399 johnnymustardseed
johnnymustardseed's picture

Buying phizz with worthless fiat??

Fri, 10/28/2011 - 08:50 | 1820400 slaughterer
slaughterer's picture

Getting harder to buy that new iPhone, that is for sure. 

Fri, 10/28/2011 - 09:05 | 1820452 Ruffcut
Ruffcut's picture

No iPhone for me. Can't get past the iBroke app.

Fri, 10/28/2011 - 08:51 | 1820407 papaswamp
papaswamp's picture

Well that explains the GDP spending component...people are draining their savings. Could possibly be a very ugly holiday season.

Ho Fuckin Ho bitchez!

Fri, 10/28/2011 - 09:03 | 1820447 Roland99
Roland99's picture

Paying down their credit cards so they can charge them right back up with XBOX games and My Little Ponies and 3D HDTV glasses

Fri, 10/28/2011 - 08:52 | 1820409 lizzy36
lizzy36's picture

That is awesome.

Win for Bernanke.

Lets get the music going like is is 2006. It ended so well, lets make sure the 2nd verse is same as the first.

Fri, 10/28/2011 - 09:00 | 1820434 HD
HD's picture

Ol' Ben wanted to push people into risky assets to get any return... I guess food and rent are pretty risky.

Fri, 10/28/2011 - 08:53 | 1820412 VyseLegendaire
VyseLegendaire's picture

People have been buying trinkets.  But at the same time, as commodity prices have spiked and wages declined, they're simple paying more to sustain the every day.  BTFD bytches. 

Fri, 10/28/2011 - 08:54 | 1820414 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

I've been buying 1 oz trinkets.

Fri, 10/28/2011 - 09:24 | 1820514 Snidley Whipsnae
Snidley Whipsnae's picture

+1 FMBoy... Pent up consumer demand for PMs...

Fri, 10/28/2011 - 12:11 | 1821176 mayhem_korner
mayhem_korner's picture

 

 

Ironic that stacking PMs would qualify as "spending"...

Fri, 10/28/2011 - 08:56 | 1820417 HD
HD's picture

Notice how the Fed does nothing but blow bubbles, and they pop faster and faster...

Not that anyone on CNBC would acknowledge such a thing.

Fri, 10/28/2011 - 08:56 | 1820418 Mike2756
Mike2756's picture

Cash out refis?

Fri, 10/28/2011 - 08:56 | 1820419 pelican
pelican's picture

But NPR says no double dip exists because of the of the GDP increase.

Fri, 10/28/2011 - 10:51 | 1820792 poor fella
poor fella's picture

That's how out of touch the economists are. The Fed believes numbers and doesn't listen to people, so price increases are good (a sign of consumer strength).

Just walk down the street and ask people, "Do you feel better now that GDP is improving?" When the response is, "I could give a flying $%^!" - then ask, "What do you feel about gas, food, and costs overall?" It's hard to get people to shut up after that.

Main Street can answer the economic questions and is one of the best leading indicators. Next question, "How's the economy doing?" It's that simple.

The Fed's conjurings don't fool anybody, except those that want to be 'fooled' to justify throwing good money after bad on Ponzi Street..

(we all know this - just wanted to cast a miniscule vote calling bullshit to the computers culling sites for sentiment)

 

Fri, 10/28/2011 - 08:56 | 1820420 Monedas
Monedas's picture

Hoarding PMs, the most sincere form of saving, is probably not even taken into account ! Monedas 2011 Comedy Jihad World Tour

Fri, 10/28/2011 - 08:58 | 1820426 Note to self
Note to self's picture

In the near future:  Everything you WANT will be really cheap, but everything you NEED - food/warmth/medicine/water - will be so expensive you won't be able to buy anything you merely want..

Fri, 10/28/2011 - 08:57 | 1820427 Archimedes
Archimedes's picture

Denninger  just gave the exact same analysis. The consumer is tapped out and now using what little savings they have left. With savings rates back to 2007 levels it is going to be a weak Holiday season.  Add another 2 million falling off the dolls in the next three months and I predict (I know, Hugh said never try and predict the future) GDP goes negative first quarter of 2012.

 

 

Fri, 10/28/2011 - 08:58 | 1820428 SirIssacNewton
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There is absolutely no incentive for people to save.  The interest rate provided to savers is so miniscule that after inflation....you're losing money allowing it to sit in a bank.  The Bernank has made sure that the savings rate will go to zero because of ZIRP.  Additionally, people are facing higher costs for food and fuel and their real wages have actually decreased on an average of 9% over the last 10 years.  People have to tap their savings to make up the difference.....they have to put more on their credit card because until this high leveraged system is flattened....only the 1% are making out and everyone else is screwed with the game stacked against them.

Fri, 10/28/2011 - 09:00 | 1820432 EscapeKey
EscapeKey's picture

Not just a US phenomena; here in the UK, the CPI runs @ 5.2%, yet standard savings accounts yield 0.25% or thereabouts, which obviously are taxed.

The thrifty are skinned, and will continue to be until there are only two classes left in society.

Fri, 10/28/2011 - 09:02 | 1820441 Archimedes
Archimedes's picture

Are you saying this is a good thing? This is the dumbest thing the Bernanke can do! Tell Americans to spend all of their savings and get deeper in debt! That is a sure fire way to crash the ecomony because there are not enough credit worthy people out there!

People should be doing the exact opposite of what the Bernank wants (Which is continue saving even if you get paid no interest) because savings is STILL capital. Credit is still debt that needs to be paid back with interest!

 

Fri, 10/28/2011 - 09:04 | 1820449 Sophist Economicus
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You were doing so well till you included ".......only the 1% are making out and everyone else is screwed with the game stacked against them"

 

Fri, 10/28/2011 - 09:15 | 1820475 SirIssacNewton
SirIssacNewton's picture

I am not against people making money....and this is not a class warfare statement.  Generally, the people with more resources, i.e. $1 miiion or more, have access to better income producing opportunites than a person with $1,000 whose only option is a bank or credit uniion.  With the Central Bank (Fed) pushing people out of saving through making the act of saving worthless and the price of commodities and finisihed consumables escalating, it leaves the majority of people with limited funds out in the cold with a depreciating asset, FRNs.  That's all I was trying to say, but I appreciate that it came off that way.  The most objective statement might be "Most people, potentially 99%, are screwed because saving accounts provide negative interest."  :-}

Fri, 10/28/2011 - 08:59 | 1820431 ZeroPower
ZeroPower's picture

This isnt news to me, the young generation simply doesn't save (ironic, as i am part of that Gen). It boggles my mind how, every so often, a tenant asks for a week or 2 delay's on this month's rent, simply because his paycheck hasn't cleared yet.

These people literally live paycheck to paycheck. A scary thought, if i was ever in that unfortunate position. 

Oh, but these same folk seem to eat out at every occassion, and of course have that flatscreen on that 120mo/0% down financing plan from Best Buy.

Rubbish.

Fri, 10/28/2011 - 09:01 | 1820437 Note to self
Note to self's picture

 . . . one two three four . . . nah nah nah nah nah nah live for today . . . 

Fri, 10/28/2011 - 09:08 | 1820458 pelican
pelican's picture

What is the point of saving?  Save for a home?  That market crashed.

Place it into a 401k?  That Crashed too.   I saved for years for nothing.

Boat, hoes, guns and gold.

Fri, 10/28/2011 - 09:23 | 1820509 Village Smithy
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I agree that it would be in the individuals' best interest to save more and eat out less. However, in reality we have built an economy that is dependent upon people "spending more". The paradox of thrift is rearing its head here, if your tenants in unit 1 stop eating out to save money and pay rent, your tenants in unit 2 who work at Olive Garden and Best Buy are going to start asking for extensions next. We are truly fucked.

Fri, 10/28/2011 - 09:03 | 1820446 mayhem_korner
mayhem_korner's picture

 

 

But, but, but...I thought folks were deleveraging????

Fri, 10/28/2011 - 10:40 | 1820743 s2man
s2man's picture

I'm doing that, too.  Golly, I'm on all the consumer statistical charts.  ;-)

Surely the average American is not prep'ing, like me and many others here (co-mayhem-ugh). What are they doing?

 

Fri, 10/28/2011 - 09:06 | 1820453 Ronaldo
Ronaldo's picture

And this is news?  When at the lower end of the financial system, those that actually earn money and use if for living, have no other choice but to exhaust savings.  Seems this can't last too long.

Fri, 10/28/2011 - 09:21 | 1820501 mayhem_korner
mayhem_korner's picture

 

 

Only as long as the redistribution and papering over of "debt forgiveness" can last.  Which ain't much longer...

Fri, 10/28/2011 - 09:20 | 1820496 mailll
mailll's picture

Well, the GDP numbers will probably be revised to negative in 1-3 months, just like it was revised downward drastically in the first quarter.  But in my opinion, the only thing that was keeping our economy afloat is that people stopped paying their mortgages since they new they were going to loose their homes anyway.  This gave them more buying power.  But now the buying power is coming from savings.  It doesn't look good.  With homes lost and savings exhausted, and if banks tighten credit further, this is a recipe for disaster.

Fri, 10/28/2011 - 09:33 | 1820529 Nikola Tesla
Nikola Tesla's picture

Whilst most people on Zerohedge advocate gold and silver for maintaining their purchase power whilst the printing presses go into overdrive, what are you thoughts on illegal drugs?

 

I'm starting to think having a healthy stockpile of cannabis might also be useful and even legal drugs which people are addicted to. Coffee, tea, sugar, cigarettes, etc?

 

Any thoughts? My only concern is how long they'll last... especially with me around.

 

Are there any studies to show what happens to the prices of drugs in the black market due to inflation/hyperinflation?

Fri, 10/28/2011 - 09:41 | 1820556 slackrabbit
slackrabbit's picture

I used to think this was a very good idea...but I just couldnt help having the odd toot every once and a while.

I cant do this with gold or silver, so i changed......but they were crazy days.......

(slack is now in an acid flash back to 1995, normal transmission will resume in 30 seconds)

Fri, 10/28/2011 - 09:47 | 1820576 Village Smithy
Village Smithy's picture

Is cannabis really illegal where you live?

Fri, 10/28/2011 - 10:28 | 1820707 TheMerryPrankster
TheMerryPrankster's picture

Sugar, though bulky, will last a very long time. It is too dry for insects to attack it. If kept dry it will not degrade, though it may absorb moisture from the air, this will not be a problem other than to cause lumps which can be easily broken up.

Sugar is a great barter item. Sugar plus yeast and water equals alchohol, another great barter item and with distillation a nice high octane fuel.

If you have room I suggest storing a few hundred pounds, it is much cheaper than PM's and you can eat it, though diabetes might be a problem if you overindulge.

Fri, 10/28/2011 - 10:36 | 1820728 Dantzler
Dantzler's picture

Sugar is a great barter item. Sugar plus yeast and water equals alchohol, another great barter item and with distillation a nice high ethanol fuel.

Fixed

Fri, 10/28/2011 - 10:42 | 1820758 s2man
s2man's picture

Plastic buckets and mylar bags, with O2 & H2O absorbers, BitcheZ

Forget making fuel.  You'll need either a special still or 14 passes through a simple still.  Stick to the single-pass, 100 proof sippin' variety.

Fri, 10/28/2011 - 10:59 | 1820825 poor fella
poor fella's picture

"Forget making fuel" -

You're probably right :/ but it can't hurt to try! A great learning opportunity in the least, if I don't set myself on fire.

Got any sunchoke bulbs..? Gonna use fruit, taters, and corn for the other stuff  ;)

 

Fri, 10/28/2011 - 11:08 | 1820870 TheMerryPrankster
TheMerryPrankster's picture

A distillation apparatus can be purchased for under 400$, that will last a lifetime. It is not difficult I'm told, since it has been done since the American Revolution at least.

A simpler still can be made with a couple of food grade buckets and an electric heater used for horse troughs, its good enough to get your wort up to 80 proof which is fine for barter.

If you want fuel grade alcohol, you will need airtight containers for storage and you will need as well as a column still and some other materials for removing as much water as possible. It isn't the easiest way to get fuel, but when the gas station is closed because the power grid failed, you might be able to run your generator for a while if you got the time and effort, hell the tv won't be working so it might be nice to have a project to work on.

Distillation of alcohol without a permit from the proper authorities is illegal in many parts of the world, in some places merely owning a still is illegal, even if you don't use it for anything but hanging clothes on.

Unless you are keeping that sugar for a century o2 absorbers are overkill. I'm using sugar i bought 5 years ago on my oatmeal and it tastes just fine and it was stored in a paper bag.

Fri, 10/28/2011 - 11:13 | 1820887 TheMerryPrankster
TheMerryPrankster's picture

Sugar will only make ethanol, so ethanol is implied by using sugar as a feedstock. Distillation will increase the amount of alcohol and decrease the amount of water in the mixture.

As a fuel, methanol and ethanol both have advantages and disadvantages over fuels such as petrol (gasoline) and diesel fuel. In spark ignition engines, both alcohols can run at a much higher exhaust gas recirculation rates and with higher compression ratios. Both alcohols have a high octane rating, with ethanol at 109 RON (Research Octane Number), 90 MON (Motor Octane Number), (which equates to 99.5 AKI) and methanol at 109 RON, 89 MON (which equates to 99 AKI).[2] Note that AKI refers to 'Anti-Knock Index' which averages the RON and MON ratings (RON+MON)/2, and is used on U.S. gas station pumps. Ordinary European petrol is typically 95 RON, 85 MON, equal to 90 AKI. As a compression ignition engine fuel, both alcohols create very little particulates, but their low cetane number means that an ignition improver like glycol must be mixed into the fuel with approx. 5%.

Alcohol is high octane, and if made by sugar is ethanol, the two words ethanol and octane are not interchangeable, I used the word octane because it describes the fuels characteristics, not ethanol which describes it feedstock origin.

Fri, 10/28/2011 - 10:13 | 1820660 PulauHantu29
PulauHantu29's picture

Barry,Timmy & Ben are gving people 0.01 interest on their savings. No wonder people would rather spend now...too bad they buy Crappy depreciating worthelss GeeGaws instead of Hard Assets.

Fri, 10/28/2011 - 10:37 | 1820734 Snakeeyes
Snakeeyes's picture

REAL personal income fell, people cut savings to purchase goods and services. Repeat of last consumer bubble?

 

http://confoundedinterest.wordpress.com

Fri, 10/28/2011 - 10:52 | 1820795 GoinFawr
Fri, 10/28/2011 - 11:41 | 1821005 JR
JR's picture

zero interest rates forever (plus QEI and QEII, adding $2 trillion to the Fed’s balance sheet), might do more than just depreciate the dollar. –Richard Benson

It’s the body block assault against the landslide of hype for continued printing…delivered as only Richard Benson can do…in his piece “Boomerang Inflation (excerpts).”

“The central Bank itself,” says Benson, “is now becoming the biggest threat to the average American.” Here’s his evidence— in Boomerang Inflation (April 28, 2011)

[T]he Federal Reserve has a lot of explaining to do to the American people about the depreciating dollar that, according to the Fed, boosts exports and helps the economy... 

According to figures compiled by the United Nations, the cost of food worldwide rose 37 percent from February 2010 to this year….  When I fill up at the gas pump now, I can see the inflation from easy money that boomerangs right back at me as I contemplate putting in regular gas (up 30 percent over the past year) rather than a higher grade, which my car calls for. 

Boomerang inflation is a weapon that works like this:  While the Fed sits back and prints more money like there’s no tomorrow, higher food prices are created worldwide.   Some countries have been so badly influenced by rising food costs that their citizens are fighting back by rioting in the streets.  The Saudi royal family, not wanting to lose their country to “dumb-ocracy”, had to bribe their citizens with another $150 billion a year in handouts to avoid riots and revolution.  The price that America will pay to keep the Saudis running Arabia is a higher oil price.  (In order for the Saudis to balance their new government budget, they need oil at over $100 a barrel.) So, by printing too much money, America has effectively been put over a barrel.

The Chinese economy, in the meantime, is feeling the heat as rising food and fuel prices have put incredible pressure on their economy…resulting in budget busting gas, food, and raw material inflation as evidenced everywhere in stores around the globe. 

What’s coming next is the inflation boomerang ricocheting back to America accelerated by China’s vicious wage price spiral…

Inflation in America could fluctuate even higher due to a big shift in China’s policy of holding their currency down against the dollar.  A rising Yuan helps them absorb rising commodity prices, and letting the Yuan appreciate is the last big change they can make to hold back domestic inflation and pray they don’t have riots and demand for political change…

It’s sad but true that stores like Wal-Mart can’t buy American-made goods because it seems we don’t make them anymore.

So, how is the American consumer really influenced by the Fed’s policies of money printing and a falling dollar?  In the past few months, the CPI has risen while disposable income has fallen at a five percent annual rate.  This is equivalent to putting on a five percent national sales tax.  Moreover, if inflation is just measured by the cost of necessities, the cost of living is rising at 10 percent a year.  (See:  http://www.shadowstats.com). 

 

Fri, 10/28/2011 - 12:23 | 1821228 pavman
pavman's picture

Re-shoring.  Its en vogue.

Actually, you *can* find stuff at Walmart made in the US.  In fact, I was surprised when I bought something made in the US the other day.  And the price wasn't crazy talk either like it used to be.

Fri, 10/28/2011 - 12:03 | 1821135 Shizzmoney
Shizzmoney's picture

Again, where is the incentive to SAVE? 

Only incentive is to spend and get in debt....which is what the establishment fianciers want.  The more the people go into the black, the fiat currency goes into the red.

Fri, 10/28/2011 - 12:08 | 1821150 Rentenmark
Rentenmark's picture

There may already be evidence of fewer "trinket" purchases, at least in regards to the upcoming holiday season.  My friend works for a Wal-Mart distribution center and he was telling me how their work load is way below estimates from earlier in the year.  Lower volume of goods equals shorter and fewer work shifts for my friend. Highly anectodal, but interesting nonetheless.

I just don't see how anyone at or below the median income can get by and buy all kinds of disposable crap!

Fri, 10/28/2011 - 12:19 | 1821205 pavman
pavman's picture

will have no savings left to use for useless trinket purchases. How does GDP "grow" then?

Jack's magic beans?

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