Question

Why is the savings rate negative despite a strong economy?

Answer 1

Bush designed this economy to run on a deficit based primarily on reality. Once the real estate number are taken out of the equation, then the economy has been loosing ground since 2000.

Answer 2

There is no real correlation between two. . . The fact is people want what they cannot afford, so they borrow to live beyond their means. Materialism has its price, and for most, it is way too high.. . The real disaster is going to occur later when the spenders need to keep earning money into old age and will never be able to retire (if anyone is still willing to employ them). Can you say "lower standard of living."

Answer 3

Is there any correlation between the two? Why do you connect the two? For what reason? What is the historical correlation between the two?. . How does this sound: If the weather is so great in Miami, why did my dog throw up Tuesday?. . Economics is a data driven science, and tying two things together implies a statistically significant correlation of those things.

Answer 4

I guess if you got money it's great. In the 1920's they asked some millionaire about the depression, and he said "What depression?".

Answer 5

Thats because people are spending instead. The reason they are spending is because of increased borrowing thanks to still existant low interest rates. Interest rates are low because the money supply is relatively large thanks to the FED's sales of treasury bonds, a monetary policy which allows us to stimulate economic growth by expanding our money supply and therefore offer low interest rates. Our large money supply has also contributed to the devaluation of the dollar (along with some inflation and an ever increasing trade defecit), encouraging foreign countries (especially China) to buy more treasury bonds from the FED, therefore floating us the money to further expand our money supply and keep interest rates down, even though the more bonds we sell, the greater out government debt (to China) since bonds are pretty much governmnet IOUs. . . In the long run, remember that the money people save is the same money banks use to lend out to borrowers. Without bond sales by the FED, the lack of savings in banks will shrink the pool of availiable money (excess reserves) banks have for loans. They will respond by raising interest rates. Investors will borrow less at higher interest rates. As costs increase, firms will cut production, people will be laid-off, and spending will once again decline with savings experiencing a rebound. Recession will return and be gone when increased savings has helped expand the pool of loanable funds, interest rates lower, and investment is attractive again. This is the buisiness cycle, an inevitable by-product of capitalism.. . By the way, I'm an AP Macroeconomics teacher. :)

Answer 6

rates for savings accounts, money markets, cd's ect are starting to rise. Shop around different banks. You might be surprised.

Answer 7

well that strated as a trend in 1997 and has continued on. many people were hurt because of the dot com boom in the stock market. had investment housing screaming to take out another mortage at 7 percent and let me make you 25 percent on your money. which hurt many Americans and has turned us in a borrowing nation. in the end a wall street econmmy is bad for the country. (which is what we had in the 90's)

Answer 8

The economy is great for rich thanks to Bush. He doesn't care about the low-middle class though, the gap between the poor and the rich is getting larger in our country.

Answer 9

The savings rate is negative because people are living beyond their means. Back in 1933 when the US Government developed Social Security, it was announced as a supplimental income and citizens were asked to save at least 10% (15% reconmended) from each paycheck into some form of investment to be used for retirement. People didn't listen, but we had a Baby Boom which caused a population growth. Social Security was designed as a pyramid sceme to have the younger taxpayers support the retired ones. Not that many people lived to the age of 65 or 70 to collect Social Security back in 1933. In the 1960's the liberals forced birth control and abortion on the culture and society of the USA, which slowed down the population birth and stopped the Baby Boom. This caused a problem because that Social Security pyramid was now upside down due to a decrease in population births thanks to birth control and abortion, and thanks to medical advances people were living to the age of 65, 70, 80, 90, ect. This put a drain on the Social Security system and the US economy. It got worse in the 1980's 1990's as Baby Boomers begain to retire. The economy might crash in 2015 when the last of the Baby Boomers start to retire and the Social Security system will be paying out twice as much as it bring in with taxes.. . The negative savings has to do with Baby Boomers retiring and cashing in their stocks, IRAs, 401Ks, and other investments. It was starting to be felt in 1999 when the Dotcom companies and technology companies fell. The economy took a tumble in 1999 due to these factors. I myself lost $50,000 in savings in 1999 due to those economic factors making my IRA worth less money. 2000 started to get worse, and in 2001 we had a war going on, 2003 another war, deficit spending stimulated the economy a bit, but the savings rate took a hit.. . Materialism is partly to blame, people keep buying things to keep up with their neighbors. A failing health insurance system is to blame as well, as most bankrupcies are caused by high medical bills. Liberalism is partly to blame for forcing birth control and abortion on the population, causing a reverse Baby Boom, meaning fewer births. High gas prices are partly to blame, as it eats into people's savings. There are other factors as well.. . The economy is great, because it is a consumer driven economy. The more things people buy, the stronger the economy grows. The problem is that hardly anyone is saving, and most people are borrowing money to live on. Most people live paycheck to paycheck and cannot even follow a budget. Good for banks, good for businesses, good for the government that taxes them all, but bad for the consumer who now owes more money than before. Only people are selling stocks, instead of buying them, which is driving down income for most businesses as their stocks lower in value and they cannot raise capital. There are two ways a business can turn a profit, cut expenses or increase revenues. Since everyone is spending beyond their means, increasing revenue is not possible. So they stick to cutting expneses, like wage cuts or downsizing, in order to turn a profit for shareholders. If managers cannot turn a profit for shareholders, the shareholders will vote in new managers.