Possibly the impact of extremely low interest rates for so long (Thanks FED). I would expect it to fade away slowly since the behavioral changes need time.
Only if we return to higher rates of interest fr a long period. Here in the UK the desire seems to be to return inflation and interest rates to approx 2%. Rates of 2% and inflation of 2% means there is little incentive to save.
The theory is that high interest rates will bring inflation down - once they are down the market is already predicting that rates will drop to 2% - so the era of cheap money will continue...
It seems to be working, but no better here than it is on the continent and USA, where inflation is already lower.
Yes, fresh food in bulk is cheaper than hamburger helper. I lived on $190 a month on veggies and eggs when I was poor as hell in 2015. I just bought everything in bulk.
While I suspect that your budget could probably be tightened up a bit, I have to say that I'm ever glad I never wanted to have children - just keeping my own ass housed, fed, and health-insured (important for someone with a bit of disability) takes about everything I got.
There was another story here this morning that got some discussion about how people are omitting children as a way of finding work-life balance; who can blame them?
Can you explain this to me in even a rough estimate?
My family of 4 spends $900 a month, and we do NOT price shop. I live in the metroplitan area of a major city, do NOT shop at discount stores, and even have higher meat bills due to religious reasons. We waste very little, I should add, and buy almost all name brand goods.
There are vast differences in how much people eat. Males between 12-25 tend to eat a lot more than girls - hormones mean they can burn a lot of calories without gaining weight - and they are also more likely to be in activities that use a lot of energy (I don't know why this is, but it seems to be the case) Babies of course eat very little.
I can believe both numbers just based on normal genetic variation.
Speaking locally, my "low cost of living" area is now quite in line with most "high cost of living" areas when it comes to buying things, maybe even higher for food items as I recently experienced while traveling (it was cheaper in a big city!). Sure, rent and mortgages are still low (for now), but they're creeping up pretty fast too. Wages here are abysmal because it's "low cost of living", but it's really not these days...
It's been driving me crazy how much I see in media this narrative being pushed that the economy is really doing great and that it's only smelly conservatives that think times are bad.
I keep seeing supply chain shocks in poultry and dairy still, food and fuel prices aren't coming back down, every company I know anyone working for is in the middle of a sales & hiring slowdown and scores of my friends in tech have been out of work six months or more.
In the past, they couldn't get away with it. We used to have competition. Competition slowly changed to oligopoly over the years but companies were still applying lessons learned in the distant past that raising prices would drive away customers. But once they learned that they now can get away with raising prices...
The prisoner's dilemma of price discovery for corporations has shifted from the competitive mode to collusion mode thanks to the perturbation of COVID and inflation fear.
The more people are aware of the fact that inflation is soaring according to the news, the more people find it expected that they see high prices at grocery stores, the more companies can raise prices.
Speaking from my own experience, the cost of groceries and rent in NYC are really incredible. There's always the idea that NYC is/has been expensive... no it really is insane.
Inflation caused prices to go up, but there isn't any drag for them to come down, only to stop increasing AS MUCH. However, at least in the tech market (but as seen in others as well), you often hear "oh the market has softened so we're paying less". Or worse, people are getting laid off. If you haven't moved jobs in the past two/three years, you're at a pre-covid salary rate.
I find it hard to square the circle, where the floor of prices has permanently been moved upwards, employers are pushing salaries down to save their own costs. This causes people to have to "rob Peter to pay Paul". Dissaving, is because workers are being robbed at the expense of employers and capital owners who can seek rents.
One of things that has been happening under the radar in NA is an enormous amount of consolidation and mergers. While you might see a lot of different brand names for stores (and the products they carry), in reality there is actually not that much competition.
In Canada, for example, there are basically only 3 huge grocers (some internationals as well, like Costco and Walmart, but that's only recently). They have been caught price fixing bread, for an example, from 2001 to 2015. I imagine there is much more going on.
They aren't even under the radar. Grocery store chains have been merging aggressively over the last few years; many larger SMBs have gotten acquired by private equity and management groups; hell, the consolidation in tech consulting these last three years has been noticeable.
A no-frills pack of bacon at Whole Foods in Cambridge is currently $6.99 not on sale (unless their online / delivery prices are radically different than in-store).
I put "Boston MA" into the store selector, and it told me that Lynn MA was the closest. It shows as $4.48/lb for the store brand. The Hormel brand name stuff is $4.98/lb.
I see, your point was that the price of bacon at a Walmart cannot be that low because there are no Walmarts in the actual city of Boston? And you are implying that you answered "definitely" despite knowing that the price was correct for the greater Boston area? And that you don't care that 99%+ of the world refers to the entire Boston area as "Boston"? If this was the point you are making, please consider being clearer in the future that you are not contributing useful local knowledge but just being a pedant.
I suspect this inflation reflects inflated transportation costs more than inflated food production. Of course, food production reflects transportation costs for feed and fertilizer too. It's transportation costs all the way down. The switch to renewable energy sources only exacerbates the cost.
counterpoint: i bought a "fancy" pack of thick-cut churro seasoned bacon at HEB here in Houston for $8.49. their basic stuff was, like, $5. i think these prices are regional.
The article makes a pretty direct claim as to what is funding the dis-savings and it doesn't appear to be government "handouts" that you are seemingly disparaging.
> overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%.
Here's the quick quote from the article explaining why this is "sustainable" over a long-period of time:
> "While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%."
This headline is pretty misleading, to me at least. "Bottom 80%" implies the poorer 80% of Americans, but it is actually referring to the bottom 80% strictly in terms of (apparent) savings.
> Personal Income isn’t the only source of household assets. The two big missing pieces are holding (capital) gains on assets, and borrowing (which adds both assets and liabilities, in equal amounts, to household balance sheets). Adding these two additional measures does shift most bottom quintiles from spending deficits to asset surpluses in most years.
> While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%.
So this is actually mostly explained by richer people who have significant investments in addition to their normal income.
Edit: The BEA says Personal Income "does not include realized or unrealized capital gains or losses." So if you sell stocks, a house, pull money out of a 401k, none of that is included in Personal Income.
Also, I think like ~20% of Americans are retired? Presumably most of them would be considered dissavers here, except for those who retired with almost no savings and are living solely on Social Security.
This got me confused as well. I read the claim and thought "how does the bottom 80% of income in the US also have a bunch of disposable income via capital gains?"
As plenty of others have said - nope, dissaving is very uncommon word. As a native American English speaker, I don't recall ever seeing it either.
One clue for future reference - the linked article had to clarify the meaning of the word _in the title_. That strongly indicates to me that, even if in certain areas the word is well understood, the author expected there to be confusion.
Not just borrowing against the value, the Personal Income metric "does not include realized or unrealized capital gains or losses." So even if you sell stocks or a house or something and make money on it, that income isn't part of your Personal Income. If you're retired and pulling money out of your 401k that has been growing in value for 30 years, I think that also wouldn't be part of Personal Income and spending that money would be "dissaving" from the perspective of this post.
Most people have retirement accounts that defer income tax, like 401k and IRA, and therefore withdrawals are categorized as ordinary income for taxation purposes, not capital gains. I would not expect the average retiree to have much or any capital gains.
> Personal income as defined by BEA differs substantially from adjusted gross income (AGI), the principal income measure used by the Internal Revenue Service.
So it explicitly is not the same as the IRS definition of income.
> For the measurement of personal income, employer contributions to pension plans are counted as part of supplements to wages and salaries. Employee contributions to the plans, capital gains of the plans, and payments of benefits by the plans are not counted as part of personal income.
I believe they consider a 401k to be a defined contribution pension plan. I know normally you wouldn't call a 401k a pension and you wouldn't talk about "payments of benefits" from a 401k, but in context (page 32) I think that is what they mean. So it seems like the amount your employer contributes to your 401k counts as income for that year, any additional voluntary amount you contribute doesn't count, and when you withdraw money that also doesn't count. Maybe I'm misunderstanding but that is my reading.
Good point. Much of the dissaving is by the bottom 20%, which probably consists of many retirees with low incomes who are spending down their accumulated assets.
Overall the methodology here sounds suspicious. It also feels like summing together income and subtracting out taxes paid across an entire quintile wouldn't work the way you'd expect, since taxes are not flat-rate.
>it is actually referring to the bottom 80% strictly in terms of (apparent) savings.
This makes sense. It’s not about how much you make, it’s about how much you keep. Someone making $5m/year can still spend more than that.
If drawing down on investments counts, I suppose the baby boomers are going to skew this number for years to come as they shift from saving for retirement to spending in retirement.
This is what the world subsidized by choosing to trade in us currency-and honestly I'm okay with that. The isolationist Maga has turned over the multipolar rock and revealed the ExEmpire crawling beneath. It could be so much worse..
None of the above, it is evidence that the US Bureau of Economic Analysis Personal Income metric "does not include realized or unrealized capital gains or losses." So for example if you sell some stocks for a profit and then spend that money on something, this blog post would consider that "dissaving", because the money you made on the sale isn't part of your Personal Income.
I'm thinking that "sell some stock for a profit" is really not an option for most of America's less-well-off. Similar for unloading one of their nice houses, or part of their art collection, or ...
Well something like 50% of working age Americans have some kind of retirement account, and taking money out of that usually involves capital gains. Two thirds of households own their own homes, and it doesn't matter how nice the house is, if you sell it and move that's a big chunk of money in your bank account that didn't come from Personal Income.
You're right that a lot of people don't have any kind of investments or houses to sell, and I think most of them are in the 20% here that spends less than their Personal Income.
Maybe just rational behavior: very few people in the USA have experienced the kind of long-term calamitous change in fortune since the Great Depression. While many today may believe (with good reason) that it's harder to build wealth, our government also steps much with many more stopgaps to prevent the kinds of losses that can really put someone out on the streets. Perhaps they just would rather enjoy consumption with money while they have it if they won't really sink or rise in any tangible way by saving and investing (or for lack of doing it).
E) This factoid is a tautology because any bucketing by income will put more savers in the big income bucket and more dissavers in the low income bucket. People have periods of saving and dissaving over any typical life course, most notably a long period of dissaving at the end called retirement.
E) The headline is misleadingly written and this is actually mostly people living off of asset appreciation in a society that is swiftly tilting towards a surplus of retirees.
Another way to look at this is "households save less while making bottom-80% income vs. top-20%". Many of the top 20% income earners transition to bottom-80% retirees. As far as I can tell this data is not tracking the same households over time longitudinally.
I took ECO-101 in 1987, among other basic tenets I learned that wealthier people have more / a majority of their money in savings, poorer people necessarily have to send the money they make back out to buy things. Things are very expensive and wages are not that great for most people, so there you go. nothing "eye-popping" about this.
What's "eye-popping" is that it's more effective for economic stimulatory actions to put money in the hands of lower income people, where that money goes right back into circulation providing sales tax revenue at the state level and federal tax revenue at the merchant income level, rather than in the hands of wealthy people / billionaires, where that money sits in an account in the Cayman Islands and does mostly nothing in comparison.
In other news, water is wet. For the bottom 50 (less than the median income, which is $76k/year), post tax income would be less than 4.5-6k/month depending on where you live. Median rent in the country is 2k and median cost of ownership was also near that number. If you include cost of vehicle ownership, health insurance, childcare etc., it really shouldn’t be surprising that people spend more than they bring in.
(Keep in mind, the 76k is the absolute top income for the bottom half households.)
so "holding gains" means the assets they hold keep going up in value, which offsets their spending?
americans are so ridiculouosly rich compared to the rest of the world.
probably helps that their govt is expert at continuously inflating the value of their assets with financial stimulus. and also basically forces the rest of the world to use their currency for buying and selling their own productions.
> Newly released data series from the Bureau Economic Analysis have revealed a pretty eye-popping economic reality that’s been invisible in the national accounts…forever. Subtract households’ Personal Taxes and Personal Outlays from Personal Income to yield Personal Saving, and it turns out that the bulk of U.S. households don’t save.
How is this data different from other data on the same matter? It's not like nobody's known the personal savings rate in the US until today.
The article nots this is only true when you exclude capital gains from Income. I don’t see how this is newsworthy, I’ve been “dissaving” for years now (selling stocks to cover monthly deficits after I moved from full time FAANG to occasional contract work), and I currently have more “net worth” than I ever have.
Generally when I see something like this I assume that someone is trying to create propaganda to advocate for how their political view (in this case likely for communism of some sort - but the right has their own ways to distort data) is best or the US is really bad (since the rest of the world isn't included).
Just remember that life savings it a zero sum game: in the end everyone ends up at 0 (there are a few religions that claim you can take it with you - I believe they are wrong, but I guess I can't prove it). If you die with a lot of savings or a lot of debt it doesn't matter - either way you are at 0 the moment you die. If you have savings it goes to someone else. If you have debt someone else just lost money. As such savings is only useful in that it can enable your future life in a rainy day.
Thus I'm not convinced this is bad. Figure out how you will handle old age when you may have medical bills and no ability to earn. You may want to save for a retirement. There are people who retire and discover they miss going to the office so they unretire. You may choose to spend more now when you are young and can enjoy it as opposed to when you are old and your body couldn't go on long hikes. I may choose something different, but I can't really judge.
So... this post introduces a new "fact" then debunks its own headline, using a phenomenon already well known to economists: the wealth effect[1]. This feels less like an economics blog and more like a social media Rorschach test -- do you read the article, and its footnotes, or just respond to headlines?
The wealth affect literature is skimpy and not very good, and heck, the Keynesian consumption function that pretty much every model uses doesn’t even have a wealth term.
This type of imbalance is necessary provided that wealth is unevenly distributed. Either interest rates fall to zero/go negative - or individuals must borrow progressively more capital.
There are a lot of people choosing to live beyond their means.
If interest rates are defining if a person is saving or not, they are already not saving, and worrying about interest rates when looking at a monthly budget already implies money is being borrowed to make ends meet.
Sure, when interest rates are low that can mean a better mortgage rate, but the response to this should be buying less house, or putting more money down. This might mean spending some more time saving before buying. It doesn’t mean person is forced to spend so much on their mortgage that they can’t afford the other areas of their life.
That is true in a micro-economic sense. However, consider what happens if everyone saves? My point was that to continue driving asset appreciation for a small portion of the population - everyone else must become a progressively larger debtor.
I think there is a middle ground to be had. Instead of someone immediately going into debt as soon as they turn 18, they could take some time to get some kind of emergency fund in place, and dedicate a percentage of their income to savings. This doesn’t mean they will never spend money, it just means they will do it more responsibly and sustainably.
I didn’t get my first credit card until I was almost 30. I was still buying MacBook Pros, Playstations, iPhones, and TVs in my 20s… but was saving until I had the cash to afford them. And that savings was after contributing to my 401k and keeping a buffer of cash to avoid needing to lean into debt. My thought was, if I can’t pay for it today, what makes me think I’ll be able to make the payments on it next month. It seemed like a risky bet I didn’t want to take.
Obviously there are people who get a bad roll of the dice early in life, but with 80% in this situation, it’s a lot of bad money habits. I’m not saying never buy stuff, just wait and bit and be more selective, especially while young. Save then buy, instead of buying and then paying back. Stuff still gets bought.
Will this mean fewer trillion dollar companies? Perhaps. $1T in spending would be taken off the table vs what’s been done right now. But slower sustainable growth seems like it would be preferable to the exponential growth we’ve seen, and allow companies to focus more on the products and long term health of the company, rather than milking consumers for profit until things collapse in on themselves.
How are people supposed to buy more stuff when 100% of their income is going to pay off old debts and they can’t even afford to make all the minimum payments? Borrowing at 0% interest to make those payments kicks the can down the road and shifts more and more risk to the banks, and that can only last so long, as we saw in 2008. In this scenario, only those saving to buy will still be spending money.
I'm so lost in this article. How can the bottom 80% be subsisting off capital gains? And is that table saying they're netting 300+% YoY in capital gains? That number is pretty squarely in the "that can't be right" territory for me?¹
Even if I reinterpret "bottom 80%" as "top 80%" and assume we've somehow inverted everybody because it's the rich that would be spending more than their income, as they'd have significant gains … I'm still lost? Do 80% of Americans have investments? The feeling I get talking to people is that most people don't, outside of a 401k, but they wouldn't be spending from the 401k (unless they were in retirement … but that brings us back to 80%).
¹… except 2018, where they got only 7%? … and yeah, that was a bad year…
Pretty sure it's retirees. They have low income because they are not working. But many of them are very well off. The rich retirees skew the average up even though most of the bottom 80% have little investment income.
Interesting, I just pulled this the other day. Average (mean) bottom-20 household has 18 K in checking deposit assets and 200 K in total assets. even while that quintile’s income caps at $32K. America is a very rich country…
To put some additional context around this, per the US Bureau of Labor Statistics, the median US household has ~$12,000 per year of excess income after all ordinary expenses -- which includes buying iPhones, nice cars, healthcare, etc. The percentage of US households with no capacity to save at all is <15% in US Federal Reserve studies.
Americans just have relatively poor savings behavior. They've always had the ability to save much more than they do. I think this partly follows from the reality that the US has not had a genuinely bad economy since the 1930s. It is a long unbroken chain of prosperity with the occasional minor blip, which changes the culture's relationship to money.
If you’re looking at the consumer expenditure survey, it’s tally of household expenditures this is about 40% of BEA personal consumption expenditures. And it’s surveyed income measures are also dicey. It’s excellent for knowing which income quintiles do which shares of consumption, though.
Common definitions of 'income' exclude wealth transfers, including cash transfers like refundable tax credits. The data don't make sense because the data are intentionally obfuscated.
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[ 0.17 ms ] story [ 217 ms ] threadIt seems to be working, but no better here than it is on the continent and USA, where inflation is already lower.
We are a family of 6. Our grocery budget is consistently between $2500-$3000 a month.
We shop at Aldi.
But as an individual I'm probably spending 500-600/mo between Publix and Food Lion...so it kind of tracks.
Choosing a very high COL area (Westchester), the expected food costs for a family of 6 is 1.7k according to the EPI
Real food? Not 100 boxes of Hamburger Helper with a shelf life of 6 years for $100.
There was another story here this morning that got some discussion about how people are omitting children as a way of finding work-life balance; who can blame them?
edit: other thread https://news.ycombinator.com/item?id=39259093
My family of 4 spends $900 a month, and we do NOT price shop. I live in the metroplitan area of a major city, do NOT shop at discount stores, and even have higher meat bills due to religious reasons. We waste very little, I should add, and buy almost all name brand goods.
I can believe both numbers just based on normal genetic variation.
If there is more money in circulation, but the same amount of goods, of course the price of goods is going to increase.
I keep seeing supply chain shocks in poultry and dairy still, food and fuel prices aren't coming back down, every company I know anyone working for is in the middle of a sales & hiring slowdown and scores of my friends in tech have been out of work six months or more.
Self-fulfilling prophecy.
"Shrinkflation" is a better concept I think, since it implies deception.
Inflation caused prices to go up, but there isn't any drag for them to come down, only to stop increasing AS MUCH. However, at least in the tech market (but as seen in others as well), you often hear "oh the market has softened so we're paying less". Or worse, people are getting laid off. If you haven't moved jobs in the past two/three years, you're at a pre-covid salary rate.
I find it hard to square the circle, where the floor of prices has permanently been moved upwards, employers are pushing salaries down to save their own costs. This causes people to have to "rob Peter to pay Paul". Dissaving, is because workers are being robbed at the expense of employers and capital owners who can seek rents.
In Canada, for example, there are basically only 3 huge grocers (some internationals as well, like Costco and Walmart, but that's only recently). They have been caught price fixing bread, for an example, from 2001 to 2015. I imagine there is much more going on.
I put "Boston MA" into the store selector, and it told me that Lynn MA was the closest. It shows as $4.48/lb for the store brand. The Hormel brand name stuff is $4.98/lb.
Why do you say "definitely"?
> overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%.
There, corrected it.
> "While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%."
> Personal Income isn’t the only source of household assets. The two big missing pieces are holding (capital) gains on assets, and borrowing (which adds both assets and liabilities, in equal amounts, to household balance sheets). Adding these two additional measures does shift most bottom quintiles from spending deficits to asset surpluses in most years.
> While many have suggested that borrowing is what explains households’ ability to keep spending (it is, some), overwhelmingly it’s holding gains that “fund” the perennial dissaving of the bottom 80%.
So this is actually mostly explained by richer people who have significant investments in addition to their normal income.
Edit: The BEA says Personal Income "does not include realized or unrealized capital gains or losses." So if you sell stocks, a house, pull money out of a 401k, none of that is included in Personal Income.
Also, I think like ~20% of Americans are retired? Presumably most of them would be considered dissavers here, except for those who retired with almost no savings and are living solely on Social Security.
Misleading title indeed.
- succinct
- also applied to governments
One clue for future reference - the linked article had to clarify the meaning of the word _in the title_. That strongly indicates to me that, even if in certain areas the word is well understood, the author expected there to be confusion.
> Personal income as defined by BEA differs substantially from adjusted gross income (AGI), the principal income measure used by the Internal Revenue Service.
So it explicitly is not the same as the IRS definition of income.
> For the measurement of personal income, employer contributions to pension plans are counted as part of supplements to wages and salaries. Employee contributions to the plans, capital gains of the plans, and payments of benefits by the plans are not counted as part of personal income.
I believe they consider a 401k to be a defined contribution pension plan. I know normally you wouldn't call a 401k a pension and you wouldn't talk about "payments of benefits" from a 401k, but in context (page 32) I think that is what they mean. So it seems like the amount your employer contributes to your 401k counts as income for that year, any additional voluntary amount you contribute doesn't count, and when you withdraw money that also doesn't count. Maybe I'm misunderstanding but that is my reading.
This makes sense. It’s not about how much you make, it’s about how much you keep. Someone making $5m/year can still spend more than that.
If drawing down on investments counts, I suppose the baby boomers are going to skew this number for years to come as they shift from saving for retirement to spending in retirement.
A) Marketing efforts aimed at getting people to spend are far better-funded and more effective than those aimed at getting people to save
B) Relentless increases in the cost of living, vs. steady-at-best sources of income, have pushed most Americans into net-spending mode
C) The long-term future is regularly portrayed as being bleak enough that many people have stopped caring much about their long-term solvency
D) All of the above
You're right that a lot of people don't have any kind of investments or houses to sell, and I think most of them are in the 20% here that spends less than their Personal Income.
Remember: If the numbers don’t add up, first check what you’re missing.
What's "eye-popping" is that it's more effective for economic stimulatory actions to put money in the hands of lower income people, where that money goes right back into circulation providing sales tax revenue at the state level and federal tax revenue at the merchant income level, rather than in the hands of wealthy people / billionaires, where that money sits in an account in the Cayman Islands and does mostly nothing in comparison.
(Keep in mind, the 76k is the absolute top income for the bottom half households.)
americans are so ridiculouosly rich compared to the rest of the world.
probably helps that their govt is expert at continuously inflating the value of their assets with financial stimulus. and also basically forces the rest of the world to use their currency for buying and selling their own productions.
How is this data different from other data on the same matter? It's not like nobody's known the personal savings rate in the US until today.
All in all a bizarre metric.
Just remember that life savings it a zero sum game: in the end everyone ends up at 0 (there are a few religions that claim you can take it with you - I believe they are wrong, but I guess I can't prove it). If you die with a lot of savings or a lot of debt it doesn't matter - either way you are at 0 the moment you die. If you have savings it goes to someone else. If you have debt someone else just lost money. As such savings is only useful in that it can enable your future life in a rainy day.
Thus I'm not convinced this is bad. Figure out how you will handle old age when you may have medical bills and no ability to earn. You may want to save for a retirement. There are people who retire and discover they miss going to the office so they unretire. You may choose to spend more now when you are young and can enjoy it as opposed to when you are old and your body couldn't go on long hikes. I may choose something different, but I can't really judge.
[1]: https://en.wikipedia.org/wiki/Wealth_effect
Banks get a monthly interest
Stocks get more liquidity
You get a combination of assets and liabilities. Your just a middle man assuming that your investments can do better then you and the bank.
If interest rates are defining if a person is saving or not, they are already not saving, and worrying about interest rates when looking at a monthly budget already implies money is being borrowed to make ends meet.
Sure, when interest rates are low that can mean a better mortgage rate, but the response to this should be buying less house, or putting more money down. This might mean spending some more time saving before buying. It doesn’t mean person is forced to spend so much on their mortgage that they can’t afford the other areas of their life.
I didn’t get my first credit card until I was almost 30. I was still buying MacBook Pros, Playstations, iPhones, and TVs in my 20s… but was saving until I had the cash to afford them. And that savings was after contributing to my 401k and keeping a buffer of cash to avoid needing to lean into debt. My thought was, if I can’t pay for it today, what makes me think I’ll be able to make the payments on it next month. It seemed like a risky bet I didn’t want to take.
Obviously there are people who get a bad roll of the dice early in life, but with 80% in this situation, it’s a lot of bad money habits. I’m not saying never buy stuff, just wait and bit and be more selective, especially while young. Save then buy, instead of buying and then paying back. Stuff still gets bought.
Will this mean fewer trillion dollar companies? Perhaps. $1T in spending would be taken off the table vs what’s been done right now. But slower sustainable growth seems like it would be preferable to the exponential growth we’ve seen, and allow companies to focus more on the products and long term health of the company, rather than milking consumers for profit until things collapse in on themselves.
How are people supposed to buy more stuff when 100% of their income is going to pay off old debts and they can’t even afford to make all the minimum payments? Borrowing at 0% interest to make those payments kicks the can down the road and shifts more and more risk to the banks, and that can only last so long, as we saw in 2008. In this scenario, only those saving to buy will still be spending money.
Even if I reinterpret "bottom 80%" as "top 80%" and assume we've somehow inverted everybody because it's the rich that would be spending more than their income, as they'd have significant gains … I'm still lost? Do 80% of Americans have investments? The feeling I get talking to people is that most people don't, outside of a 401k, but they wouldn't be spending from the 401k (unless they were in retirement … but that brings us back to 80%).
¹… except 2018, where they got only 7%? … and yeah, that was a bad year…
https://www.census.gov/content/dam/Census/library/publicatio...
https://twitter.com/asymptosis/status/1755563199238431211
https://twitter.com/asymptosis/status/1755633196522409995
Americans just have relatively poor savings behavior. They've always had the ability to save much more than they do. I think this partly follows from the reality that the US has not had a genuinely bad economy since the 1930s. It is a long unbroken chain of prosperity with the occasional minor blip, which changes the culture's relationship to money.
Those 15% are on food stamp SNAP benefits.
https://en.wikipedia.org/wiki/Supplemental_Nutrition_Assista...