Monday, January 09, 2006

Living the TV Life

Budgeting by Carrie from Sex and the City. She spent more on taxis, cosmos and shoes than she could possibly have earned as a writer and that doesn't include her apartment. I notice that I spend less when I'm working, but then I very rarely shop the internet.
Americans saving less than nothing / Spending could outstrip income in 2005, which hasn't happened since the Depression: "'Savings is the absence of consumption,'' he said.

Traditionally this unspent income has been used to accumulate capital for future investment. By contrast, the recent spell of low savings -- or high spending -- has provided a short-term stimulus, helping the nation's output of goods and services grow at an enviable 4.3 percent rate in the third quarter of 2005.

But many experts say that in the months ahead, savings-starved, debt-burdened households will slow their spending and, with it, the economy. 'You're seeing a situation where the consumers are spending every penny they possibly can and borrowing on top of that,'' said Joel Naroff, a Pennsylvania economic consultant, who expects growth to cool in the near future.

And while classical economic theory says savings must accumulate for future investment, if consumers suddenly start spending less, it could cause problems. 'If everybody decided to save, the economy would contract and you'd lose jobs,'' Leggett said.

The Federal Reserve's Lansing examined the savings argument more closely in a November Federal Reserve article titled 'Spendthrift Nation.' He noted that in the 1980s the personal savings rate in the United States averaged 9 percent. Put another way, back then Americans spent 91 cents of every after-tax dollar they earned, which left a 9 cent surplus for savings or investment.

During the 1990s, Americans spent about 95 cents per dollar earned and had a nickel left. The nation ended 2004 with an annual savings rate of 1.8 percent. The rate has continued down through 2005, attracting the notice of some prominent economic observers.

'If we can believe the numbers, personal savings in the United States have practically disappeared,'' former Federal Reserve Chairman Paul Volcker wrote in an ominously titled opinion piece, 'An economy on thin ice,' in April.

But other economists, including current members of the Federal Reserve, say the falling savings rate isn't so alarming. They argue that the declining savings rate has been offset by another factor -- rising home prices.

"A lot of the psychology of savings is that you're prepared for an emergency," said economist Tim Kane with the Heritage Foundation in Washington. "And if your house is worth 10 percent more, then you feel you're prepared.''"
What if you don't own a house? If you're spending more than you make, that must mean credit, which like equity, will also run out.

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