America vs China in savings

Discussion in 'Politics & Religion' started by Rick_Michael, Nov 1, 2006.

  1. #1
    People are talking about the national debt, but I find the consumer spending a big concern as well. Why is China saving so much money w/a smaller GDP (not that what they're doing is good for them, either)?


    http://www.morganstanley.com/GEFdata/digests/20060309-thu.html

    Does anyone have a breakdown on what America spends their money on? How can we reverse this trend?

    Remeber we're talking about consumer spending, not government spending.
     
    Rick_Michael, Nov 1, 2006 IP
  2. britishguy

    britishguy Prominent Member

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    #2
    Can America reverse the trend, sure but by fair trading without a political agenda No

    With a stick and a political agenda Yes
     
    britishguy, Nov 2, 2006 IP
  3. ferret77

    ferret77 Heretic

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    #3
    Americians revel in buying crap they don't need, ecspecailly on credit

    Nobody pays cash for anything anymore, if someone has $5k they don't look at cars that cost 5k they look at cars that cost $25k and get a $20k loan.

    One of neighbors for example in law enforcement, probably makes like 40k a year, maybe a bit more. Drives a truck that costs at least 35-40k and gets about 12 mpg, then he comutes.

    People get crazy mortgages where they only pay interest, people get credit cards then just pay the minimium balance, the list goes on and on.

    People need to own bigger and better stuff NOW, they can't wait until they actually have the money.
     
    ferret77, Nov 2, 2006 IP
    debunked likes this.
  4. demosfen

    demosfen Peon

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    #4
    When you are buying a house and taking a 30-year mortgage, you are buying a house for yourself and a house for your banker. Even 2 houses for banker, depending on rate. I am a poor bastard who can't afford to adopt a banker, so I pay cash for everything. But then, I am considered a weirdo around here

    Mortgages, credit cards, loans, etc. are tax on mathematically challenged
     
    demosfen, Nov 2, 2006 IP
  5. mistermix

    mistermix Active Member

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    #5
    I think that all economic figures from Chine should be taken with a pinch of salt because its all part of the communist propaganda. I think it would be better to compare the US savings rate with Canada and European countries.

    But you do have a point about the low savings rate in the US, it could become a problem.

    I personally think that high personal debt will be the catalyst for the next worldwide recession.

    I'll try and find some actual figures and post them here.

    Good thread.
     
    mistermix, Nov 2, 2006 IP
  6. debunked

    debunked Prominent Member

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    #6

    I wish I could buy a house outright. Someday I hope to have it paid off. Is there something you can teach me? An option I don't have is to rent right now, it would cost a lot more in rent than my mortgage, but then again if you could show me how to do it, I guess I would.
     
    debunked, Nov 2, 2006 IP
  7. ferret77

    ferret77 Heretic

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    #7
    you know its funny, my girlfriend and I were going to buy a place on an Island, and we still might

    But the interest on the loan, taxes and insurance cost more the it costs to rent a place, and that’s not counting actual payment on the loan so we are going to rent a bit and hope a couple more hurricanes lower property values, or make the plunge and move to central America

    I think debunked the size of the loan vs your income is more of issue here, when people with average salaries buy a house for like over a half million, then buy the cars, etc its gets a little ridiculous, at least in my eyes
     
    ferret77, Nov 2, 2006 IP
  8. debunked

    debunked Prominent Member

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    #8
    Well, I bought this house 3 years ago with a descent down. It has about doubled in value and we will probably sell off part of the lot (buildable) for about 100k which should help.

    The cars I own aren't anything special, just fits the needs and are fairly reliable - 98 ford van 12 passenger -huge van, (cost $4400 which including getting it here from Kentucky) can take the family plus some and pull the trailer. 99 ford minivan for daily driving or long distance when it isn't the whole family - like daughters gymnastics meets.

    Fairly simple living, I do want to get the income up because things are just getting expensive. Try buying for all the kids when fall comes and they don't fit their fall/winter clothes!
     
    debunked, Nov 2, 2006 IP
  9. demosfen

    demosfen Peon

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    #9
    Just my opinion. If I owned a house that doubled in price in 3 years, I would consider selling it, renting an apartment for a few years, and investing the money into something stable. It's overpriced and will go down in price over the next few years. Of course you'd have to spend effort and time on moving and the best time to sell was possibly 6-12 months ago... But it's something to consider. I would definitely sell that 100k lot and put half of the money into gold and half into silver. Here is some good stuff about housing market crash -

    http://goldismoney.info/forums/t43099-housing-crash-links.html

    And if it gets really bad, we'll see mass unemployment and foreclosures, you might be buying a similar house for half the price in a few years. It just happens that precious metals are in relatively early stages of bull market (especially silver - there isn't much of it left under the ground, and industrial demand is souring). I don't think government can or will do anything about depression/recession, the only question is when, not if, it's going to happen. And as housing market chills, a lot of jobs in construction/real estate are lost. During Great Depression, many people lost everything, but there were those who suspected what was coming and made a lot of money on it. I am standing on sidelines ready to trade my metals for a house when the time is right

    I am currently renting 1-bedroom in NYC for around 11k a year, it just doesn't make sense to buy a house here for 500k+, plus interest on mortgage, property tax, and repairs
     
    demosfen, Nov 2, 2006 IP
  10. ferret77

    ferret77 Heretic

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    #10
    I don't know about a housing crash, but for the first time in years prices here stopped going up, I don't think its unreasonable to think they might drop a bit.

    That sounds really cheap for NYC
     
    ferret77, Nov 2, 2006 IP
  11. ReadyToGo

    ReadyToGo Peon

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    #11
    Since when is saving money good for the economy?
     
    ReadyToGo, Nov 2, 2006 IP
  12. mistermix

    mistermix Active Member

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    #12
    Savings allow an economy to draw on its own assets (people savings) to use for investment in new busnisses.

    It also means people are less likely to suffer serious financial problems if there are any 'shocks' like loosing a job or if mortgage rates go up.

    If savings are too low then businesses will look elsewhere for money i.e. abroad. The problem at the moment is that savings are very high in Japan, China and many European countries. These savings are invested in US companies which results in higher US share prices.

    These higher share prices give the impression of wealth and of a booming economy - so US citizens feel richer and therefore save less and spend more.

    The problem with having lots of foreign money invested in your shares is that if, for whatever reason, those investors decide to take their money elsewhere then prices will fall and interest rates will go up.

    If interest rates go up then this is when things could turn nasty.
     
    mistermix, Nov 2, 2006 IP
  13. ReadyToGo

    ReadyToGo Peon

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    #13
    Do you think that's really what happens?
    Think about what you've just said:

    Americans save less → Foreigners invest more in US companies → Americans somehow think that they have more money to spend → Interest rates go up → Foreigners take the money out and the market goes down → Now we are stuck with high interest rates and a contracting economy

    Nah, I don't buy that argument.
     
    ReadyToGo, Nov 2, 2006 IP
  14. mistermix

    mistermix Active Member

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    #14

    My post is not what I think happens, its what economists observe happening.

    Whats your point?
     
    mistermix, Nov 2, 2006 IP
  15. ReadyToGo

    ReadyToGo Peon

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    #15
    Economics is called the dismal science for a reason.
    One may argue that a balanced budget is desirable for the well-being of our economy. However, a Keynesian economist would say that budget deficits and surpluses are merely a routine byproduct of countercyclycal fiscal policy. The goal of macro policy is to balance the economy, not the budget.
    Who's right? No one, and that's my point.
    One cannot observe an event and label that as an incontrovertible evidence that X will occur.
     
    ReadyToGo, Nov 2, 2006 IP
  16. mistermix

    mistermix Active Member

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    #16
    The savings rate in the US is regarded as low at the moment but wether that is a problem depends on what the future holds.

    The government debt level is also high, but again time will tell.
     
    mistermix, Nov 2, 2006 IP
  17. ReadyToGo

    ReadyToGo Peon

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    #17
    Yes, exactly. :)
     
    ReadyToGo, Nov 2, 2006 IP
  18. mistermix

    mistermix Active Member

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    #18
    But it doesn't look good.

    Especially in a few years when the baby-boomers begin retiring.
     
    mistermix, Nov 2, 2006 IP
  19. ReadyToGo

    ReadyToGo Peon

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    #19
    US productivity is growing at an average of 3%. We may be able to minimize the impact of high rate of retirement but as you said, only time will tell.
     
    ReadyToGo, Nov 2, 2006 IP
  20. Rick_Michael

    Rick_Michael Peon

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    #20
    Just curious...wouldn't the baby-boomers retirement lead to huge increases in spending ie vast demand? More jobs, expansive demand in certain businesses, etc? It seems like it would be a good thing.

    My grandparents are almost on their way to 'heaven', and they're spending money like there is no tommrow.
     
    Rick_Michael, Nov 2, 2006 IP