Right before the Great Debt Crisis of 2006 - 10 Americans' personal saving rate had dropped to an all time low around 3.5%. After rebounding significantly to around 7.5-9% (excluding the COVID period) it has now collapsed back down to all time lows (see chart below).
Personal Saving Rate At All Time Low
Another way to look at it is that Americans spend 96.5% of their income, the highest percentage in the world. This statistic goes a long way in explaining the current resilience of the US economy despite soaring inflation and slow wage growth. But this resilience is hollow: people just can't keep raiding their savings forever. And given sharply higher interest rates they can't keep piling on more debt.
In fact, what keeps piling on are warning signs that all is not well. But, as usual, people are ignoring them.
All that savings going into BTFD :)
ReplyDelete… where it may turn into ash 😱
Deleteunrelated note... this is partly a corruption problem... but at a deeper level, it is a de-industrialisation problem.... the reason U.S. military equipment is getting more expensive is because the trained industrial labour force, with its depth of skills and knowledge is no more... thus, everything the military needs must be custom made... the people custom trained ... which is expensive... also, it is prone to failure, as basic industrial common sense is no longer available...
ReplyDeletehttps://www.nytimes.com/2023/02/04/us/politics/littoral-combat-ships-lobbying.html?unlocked_article_code=mPlP0aTZsW1L-F7Q1HnMwErVbTKN0SSUIqwl6jSoLPunAEaxRbfTFYZ8obyMwFZmAjZqNZHdbpdLuK8eB7d5mN5CVL-nHvqt-pp_hmoTgERSFRgw1JPcT62jOt8T_64H6JZaoAhJCBABTQgyW5hhrzRUpNBXXYUc7il_8eL2nSJqTZhgKZ5UlC_hMkbU0jiu9VPJ2zXdYIutoJyCkLtq6A9vK5C1fL9I0Be-6bLCUReNSg-K9KicPeZ5ooLTMK_5M3ZSywa8sD_yjm_cvxTM89lqHx_lXnv4WxXcu6ATV-0Z8lkxoM9a5y2Cvxt9rZay3U2kc3VTTkewUEsEa82YWcLwzYz59JZS2dwY8W0&smid=share-url
Mmmm dunno about that. While it is absolutely true that the US has radically de-industrialized (to the benefit of China and Germany, I might add) I think the issue here is simpler: money. The defense budget currently stands at 3.3% of GDP, down sharply from 9% in 1967, or even 5% in 2010. The sad fact is the US is "investing" in iphones, Netflix and Twitter. Bad idea. Very bad idea.
Deleteyes, I kind of like your way of describing de-industrialization... the consumption side of GDP is non-productive... thus, as the U.S. consumption increases, all productive activity (I am very loosely classifying military as a productive activity) will naturally be an ever smaller percentage of gdp...
DeleteAs you know I studied engineering - hard core chemical engineering, none of that prissy stuff like computers (I'm joking, of course;) - so I am furious at the way manufacturing has been demoted to a has-been in the US. By definition, building an airplane, frigate or tank requires one heck of a lot more technical sophistication and integration than writing code for a game or a trading platform. So, Boeing, Lockheed, Raytheon, et al are just about the last remaining fully fledged industrial US giants with global significance.
DeleteFunny enough, the article mentions that the builder of the littoral vessels is Fincantieri, an Italian shipbuilder...even if they are physically built in the US.
DeleteHeaven:
The police are British
The cooks are French
The engineers are German
The administrators are Swiss
The lovers are Italian
Hell:
The police are German
The cooks are British
The engineers are Italian
The administrators are French
The lovers are Swiss
https://www-users.york.ac.uk/~ss44/joke/heaven.htm
https://www.forbes.com/sites/lorenthompson/2021/07/23/us-shipbuilding-is-at-its-lowest-ebb-ever-how-did-america-fall-so-far/?sh=409a75646c87
DeleteApart from military vessels, the equation is simple: No goods produced = no cargo vessels required. As it stands now, the world's largest containership/logistics companies are Danish, French/Italian/Swiss and Chinese. And yet, the container was invented in the US and for years on end the largest containership company was American...
Deleteyes, it is frightening... from an industrial perspective, a war between U.S. and China will be like ww2... except U.S. will be in Germany's position and China will be in the U.S. position.
DeleteLike ww2 Germany, the U.S. will be reliant on using a slim technological advantage to compensate for a much weaker industrial base.... I am not sure it works... in the end, 30 Shermans beat 1 tiger...