Carl Dassbach wrote: > Question - how does the lack of personal savings in the US (as far as I know > the US has the lowest rate of personal savings, less than zero, or seen > another way, Americans spend 103% of their income) figure in the current > crisis?
the low US saving rates has two sources, as far as I can see: 1) for working people, stagnant real incomes (especially if we use a better, non-Boskinized measure of consumer prices) and increasingly pressing needs pushed a lot of people to cut back on their saving -- and to increase their borrowing. This was facilitated by institutions of easy credit, including "home equity loans" (i.e., 2nd mortgages) based on inflated house prices. (One way to look at this is that stagnant mass consumption is the result of the recent neoliberal phase of US capitalist development. It is then made up for by another side-effect of that phase: _laissez-faire finance_.) 2) for richer folks, rising stock prices (especially in the 1990s) and house prices (especially in the 2000s) were treated as a substitute for saving part of income. This also got them into borrowing, including leveraging financial investments (and low-cash-up-front home loans). Here, borrowing was based on inflated asset prices rather than on stagnant incomes. Low domestic private-sector saving and high borrowing was allowed by capital inflow, loaning (and equity purchases) from outside the US. With the end of the housing and stock market bubbles, all of this accumulation of debt is spelling gigantic trouble. Falling house prices, unsold houses, foreclosures, bankruptcies, and the like are all encouraging a steep and likely long recession. The fact that the US external debt has ballooned is compensated for by the facts that (1) those debts can be paid with US dollars and (2) a lot of the toxic assets (based on bad mortgages) are held overseas. -- Jim Devine / "Nobody told me there'd be days like these / Strange days indeed -- most peculiar, mama." -- JL. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
