Hey, it looks to me like whenever they didn't care for the way things looked, they just played with the numbers. Income and personal saving were down, yet they figured out that if they merely added in capital gains to personal saving figures, it eliminated personal saving's downward trend. Problem resolved. Everything looked hunky-dory once again. The fundamentals of the economy were once again, sound.
Just exactly who did they think were receiving all those capital gains? It certainly wasn't John Q. and Jane Q. Public. Their incomes were dropping (that is if they even still had a job ... given all the jobs leaving this country). Savings rates were not just decreasing, they were evaporating as far too many folks began dipping deeply into what little they still had so they could pay the bills. And when what savings they did have were gone, they began running up the credit cards.
The 'personal saving rate' has been in negative numbers since the second quarter of 2005. The savings rate for 2005 was a negative 0.4%, meaning that not only did people spend everything they earned, but they also dipped into savings or increased borrowing to finance purchases. The 2006 figure was even lower, finishing out the year at negative 1%. That's the poorest showing since a negative 1.5% savings rate in 1933 during the Depression. The savings rate has been negative for an entire year only four times in history — in 2005 and 2006 and in 1933 and 1932. [USA Today]
According to Naked Capitalism, "households with the cash (and assets) 'are not the ones with the debt.' Rather, the top 1% of householders hold 30% of the assets and 7% of the debt, while the bottom 50% hold a mere 6% of assets but a burdensome 24% of the debt."
Analysis of financial flows over the past few months shows that many households have been exceeding their means and threatening the market as a whole. When the economy is healthy, U.S. households normally supply funds to the capital market and those funds supplied are sufficient to meet business financing needs. However, when job losses are in the hundreds of thousands and rising, net incomes drop, disposable income evaporates as do savings rates. The credit markets begin to get a bit sluggish. Now add in the housing crisis and massive numbers of foreclosure rates and credit comes to an absolute standstill.
If they didn't see this one coming, they're absolutely delusional ... and they're definitely not the folks we need to have working on finding the solution to our nation's woes. Unfortunately, the Bush administration is still in charge of things for another three agonizing months. I wonder how much more havoc they can reak in our lives before we can finally purge their kind from office.
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