Savings

Advertising has us chasing cars and clothes, working jobs we hate, so we can buy (crap) we don’t need.  Tyler Durden

Tyler Durden had a way with words.  Will Rogers put it this way, “We spend our lives working jobs we hate, to get the money to buy stuff we don’t need, to impress people we don’t like.”

Debt is certainly one damaging manifestation of consumerism, and I have preached on that subject many times on this blog.  Debt is destroying our country, our economies, and far too often, our families.  Debt was once a shameful thing.  Now teenagers have credit cards.  Debt has become as American as apple pie.  In 2008 we owed 127% of our annual income.  Since 1990 mortgage debt quadrupled, from $2.5 trillion to over $10 trillion.  Mortgage is debt collateralized by our very homes.  It is the worst kind of debt, yet it is the kind that carries the least stigma (and is even promoted by our government through the insane mortgage interest tax deduction!).

But this is not another rant about debt.  Instead, I want to discuss savings– the flip side of debt.  Between 1950 and 1985, as a nation we saved 9% of our incomes.  But by 2008 our savings rate was zero.  We saved nothing.  Instead we went deeper and deeper into debt.

By comparison the Chinese save on average one-half of their incomes, despite the fact that their incomes are vastly lower than ours.  In fact, they finance our debt with their savings.  Proverbs 22:7 says that “the borrower is the servant of the lender.”  I suppose we should all start studying Chinese.

So what happened to our national propensity to save? 

Frugality, moderation and thrift were once classical American virtues.  Indeed when the Founders used the word “virtue” (and it was one of their favorites), it was often in relation to these very traits, which of course promote independence.  But as modern culture has descended deeper and deeper into the pit of crass materialism and greed, our insistence on having it all, and having it now, has destroyed our desire to save.

There are many other things that contribute to this.  Today both spouses typically work full-time to have the same standard of living that was once possible on one income.  Of course we have also re-defined what is a minimally acceptable lifestyle.  One television per household is no longer adequate.  Instead we must have one for every room.  And one television to last a lifetime is also unacceptable.  Now we must buy the latest high-tech gizmo available, which means a new TV every few years.   And what is true of TVs is true of nearly every other consumer item we buy.

Another factor has been the government’s deliberate manipulation of interest rates, to discourage savings and promote borrowing and spending.  The Federal Reserve sets interest rates artifically low, well below the rate of inflation.  Anyone who saves in that environment sees his savings eaten away by inflation.  It is little less than theft. 

This policy of discouraging savings also is designed to drive savers into more speculative “investments.”  The policy of depressing savings rates has forced billions of dollars into the equity markets, artificially inflating them and creating a vehicle for the eventual theft of that money.  Millions of Americans who innocently believed that “investing” in stocks was the equivalent of savings, have seen their savings vanish as the market bubble has burst.

Millions more bought into the lie that buying a house was equivalent to savings.  Buying a house with borrowed money, no less.  A enormous industry of parasites sucked the wealth out of millions of Americans, convincing them to buy homes they couldn’t afford, on the ludicrous idea that those homes would appreciate indefinitely, ultimately making the homeowner rich, through no effort at all.  It was too good to be true, but very few folks realized it.

So now we’re broke.  We’re leveraged to the max.  We have mountains of stuff that we bought on credit, filling houses that we bought on credit.  And the piper wants to be paid.  The homes that we thought would substitute for savings have been revealed to be nothing more than what they always were–places to live.  The stocks that we thought we enable us to retire are worth half what we paid for them, and overpriced at that.

And we have no savings.

Our society is learning a painful lesson.  As a nation we are beginning to save again.  Hopefully, it will be a long time before we’re foolish enough to repeat the mistakes of the last few decades.

I look forward to the day when once again folks can earn a decent rate of interest on their savings, and when a fair rate of interest is all they will expect.  I look forward to the day when those savings will be deposited into community banks, which will loan them to deserving, creditworthy businesses as capital.

When that happens real prosperity will return to our country.

Love Wins

 

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