Nice reporting job, Wade. Our savings rate is a disgrace (I think we're keeping with the "Act Your Wage" theme here quite nicely). I can't count how many loans I have done for million dollar plus homes where the borrower had next to nothing saved. I had to do a review and create a quiz based on Bill Bradley's book "The New American Story" and reading it was an eye-opener for many reasons. In it he rightly claims that our citizens manage their finances about as well as our government has been lately -- major deficit spending.

Bradley states, "When people don't save and corporations don't save for them, they cannot have a comfortable retirement. Thirty-five percent of senior citizens have no pension other than Social Security. Fifty percent of all Americans own no stocks. If you're between 55 and 65 years of age, the Federal Reserve says you should have $314,000.00 in your pension account. The average is $60,000.00."

Scary.

Gina, what I'm curious to understand is, for all those loans you've done where the borrower had next to nothing saved, why did you still do those loans?

This is also part of the problem. We all know banks make money by lending. We are quick to blame the borrower for "living beyond their means", "being greedy", etc., but the banks who push loans at people who really can't afford them just to report the receivables on the bank's balance sheet must share some accountability. After all, these borrowers would not be borrowers if lenders didn't lend to them; and if any one understands a borrower's statistical likelihood of repaying, it should be the professional money managers who assess the risk - the pros should have been saying "no".

Great Post Wade, and great comment Gina. WHne it comes to graphs and statistics they are only as good as the person that made them. they can always be manipulated and trans figured to make one thing or another look good. With graphs I can make it look like my LOs are great at what they do or I can find out that thier conversion rate is in the dumps. either way the government is never going to explain what and why they do what they do we just need to make sure that we are doing what we need to do so that we and our family is taken care of.

Thats pretty interesting. I read a lot about the negative savings rate two years ago. I'm surprised this is the first I have heard those stats were not accurate.

Although it still looks like the savings rate came down in 2005.

Wade,

Great analysis. However, despite the revisions the trend is still not positive. Also factoring in the recent declines in home prices I'd say folks are really stretched and it appears quite a few are living pay check to pay check. Not a healthy sign for long term growth in my opinion.

Mr. Young,
The revisions to the personal savings rate could be due to a number of reasons. First and foremost is the fact that the U.S. savings rate is actually far greater than the numbers can indicate. And believe it or not, this is because of taxes and government programs that taxpayers must feed. Take the case of China and Japan. Both countries have very high personal savings rates when compared to the U.S. Yet both countries have social safety nets that are far less encompassing than that of the U.S. As a result, the Chinese and Japanese workers/consumers must sock away some money just in case disaster strikes to them or their families. If a Chinese or Japanese worker gets laid off, they do not get the benefit of American food stamps or unemployment benefits or severance or new job training, etc.

Also, for as much grief as the U.S. receives regarding its health care system (and justified grief at that), no one takes into consideration that out of a nation of roughly 300,000,000, only roughly 50,000,000 are uninsured (depending on whose numbers you reference). This is much better coverage than many other nations with the exception of Canada and some Western European countries. Although 50 million is still 50 million too many, employers and state/federal governments shoulder a very large majority of the health care costs of these 250 million insured. These health care costs are essentially "savings" to the insured because that is spending that they do not have to forgo as the "savings" have already been provided for them by an outside source. Personal Disposable Income does not include medical benefits and other perks and benefits that an employee receives. Personal Disposable Income really just reflects an employee's salary and wages.

And as you mentioned, pensions and retirements contributions are not accounted for. The U.S. does actually do a pretty decent job at setting up its citizens for a decent retirement as long as those citizens take advantage of the tools that are being extended to them via their employers or the government. Also, the personal disposable income numbers do not account for future Social Security payments, which must be included as "savings" as this is precisely the purpose of the Social Security program--to allow workers to dip into the money that they have contributed throughout their years of working.

The personal disposable income also does a terrible job at accounting for income that was realized outside of salary and wages, as I mentioned earlier. If an individual receives money from dividend payments or interest earned from a Certificate of Deposit, not all of that income is accounted for in the disposable income numbers. As
2005-2007 saw very high returns in a number of markets, including stock markets and even the housing market until 2007, one can reasonably assume that total incomes rose and that Americans spent more, even this income isn't found in Personal Disposable income.

Any of these factors could have contributed to upward revisions of the numbers provided by U.S. BEA, although I doubt that all were accounted for. And as you said, some downward pressures on wealth and other incomes have been experienced of late, so maybe some downward revisions are in order, especially if the U.S. BEA accounted for increased wealth in their latest revisions. Yet, the personal savings rate of Americans in recent months has actually increased quite significantly--to around 2%--as household wealth has almost certainly declined. So I will conclude with a question to any who wants to help me answer a question that has been bugging me: Should the indicator measure income, or should it measure actual household wealth and income from all possible sources?

Joe makes some good points. Many Americans have built-in health care courtesy of corporate America. If Americans were small business owners instead of corporate worker-bees, they might be healthier and not need the health care programs included in their corporate enslavement ... but that's getting off the point.

Americans do have access to social programs that aren't available in other countries. However, I don't think it's fair to compare the U.S. to other countries. It's apples to oranges. We have had benefits conferred on our country (such as the strategic advantage of having an enormous sea-to-sea landmass) that a country like Japan just doesn't have. We should be ahead of other countries. We should have better social programs. I'm not interested in comparing the U.S. savings rate to other countries. I'm more interested in competing against ourselves.

To me, savings is money in the bank. Social security isn't savings. It's a tax, and it probably won't be there when I retire. As for Joe's final question, in my opinion, savings should pertain to income, not total personal wealth or other income (such as inheritance). Savings is what you put back after you pay your bills, and unfortunately, Americans aren't doing much of that.