Saturday, June 27, 2009
Yesterday we learned that American consumer confidence was at its highest level since February 2008 and that our savings rate was shooting through the roof, reaching 6.5% in May, the highest rate since the early 1990s (check out this graph to see the speed of the ascent). The unemployment rate rose but so did personal income, largely on the back of one-time government stimulus payments to senior citizen (I missed out on those -- any of our readers get one?). Apparently, notwithstanding their growing confidence, most people banked the payments or used them to pay down debt, either of which is "savings."
In general, I applaud the higher savings rate and hope it persists for a generation. With the federal government spending trillions it does not have and cannot raise by taxation, Americans are going to need a lot of savings to avoid debasing their own currency and destroying their own standard of living to finance all of this largess. There is no time like the present to relearn the thrifty habits of our grandparents. That said, yesterday's news does tend to support at least one of the arguments that Barack Obama made for his massive direct spending stimulus package over the Republican call for tax cuts: That tax cuts and direct transfer payments will not contribute to economic growth in the short term because people will use them for debt reduction rather than investment or consumption. That is indeed what seems to be happening here. (Of course, neither is this news a refutation of the right's counterarguments, which were (i) changes in the tax law would foster a change psychology that would make for more durable economic growth, and (ii) the stimulus money flows too slowly to achieve its purported objective, which is to stimulate the economy now).
I'm sorry, but anyone putting money into a savings account is making a sucker's bet, unless its strictly for an emergency cushion. Once rampant inflation takes hold, all those dollars are going to lose their value. Hard assets are the place to be at this point.
I saw only one article about those $250 social security checks when they were announced and never heard about them when they happened. It's scary how the government can just take tax money, send it to people in cash and we won't even hear about it -- even a huge broad program like this.
I got $250 from Social Security - it's an "Economic Recovery Payment" under the Recovery and Reinvestment Act. I'm 66 and get Social Security monthly.
So I sent a check to my Congressman (Hodes, D-NH) payable to Dept of the Treasury, returning the money and asking that he send it to the appropriate place. Quote: "I will not participate in this raid on my children's labor."
His office returned it, saying he couldn't "accept" it. So I sent it back, noting that I didn't ask him to "accept" it, only get it to the appropriate agency.
Yes, I'm jerking him around. Yes I'm making a point.