Yeah, the economy is running on borrowed money. I read an article today that said Americans are now spending $1.04 for every after tax dollar they earn.
It went on to say that it worse in 1950 at $1.06 per dollar. What makes it bad this time is the huge base of baby boomers that should be in saving-mode rather than spending mode.
the average person right now does not see any advantage to putting money into savings for these reasons:
1) savings pays nothing
2) the stock market has been basically flat since 1999
3) With corporate scandals there is fear and lack of trust
Why save when you are not making anything is their thought process. I think people are out buying tangible assets because they feel safer than putting money in the market. If they buy a motorcycle, a home, or raw land, or gold bullion they have something tangible that doesn't go down on their statement every month. So, to them a collectable Harley is a better investment that owning stock in lets say Wal Mart at 24x eps and they get to enjoy the Harley. People are investing not out of greed, but to receive income.
Once we see interest rates get to a normal level- there be a greater incentive to save.
Don't worry, they're not going to print more money. Brazil, Russia, Yugoslavia...plenty of nations learned that doesn't work, just leads to hyperinflation. I was in Yugoslavia in 1989, and changed money every day, since the dollar bought more dinars every day. I still my million dinar note as a souvenir.
Adapting the logic of the Phillips Curve, inflation is a tax on the wealthy, and we can't have that!
Quote:
On 2004-11-04 20:54, loon wrote:
Don't worry, they're not going to print more money. Brazil, Russia, Yugoslavia...plenty of nations learned that doesn't work, just leads to hyperinflation.
They're not going to print any more money? Where have you been? Since 9/11, the money supply has been increased by 40%. That represents a decrease in purchasing power of 29%. This is nothing more than a way for your government to tax you, without you knowing that it is really a tax. Whoever said they are not going to raise taxes needs some basic economics courses.
The picture for America is very, very bad.
And you are right, baby boomers should be saving, or investing for their retirement. Not spending. But on they spend.
It appears many of them still think SS will take care of them in their old age. HAH! SS is going bankrupt. Only by the grace of Alan Greenspan and pushing back the age of eligibility do we not have it bankrupted yet.
Besides, when that massive wave of baby boomer retirees hit... we're going to have a financial tsunami right here. SS will be drawn out. As will 401K plans (which thankfully are taxed as they are drawn out, saving the economy a little) and IRAs (which are bad for the economy, because the tax is already paid). This in turn will effect the stock market.... which could then go down. This in turn COULD create a panic, because people will want to save their retirement investments...but they can;t because there are some restrictions on 401Ks and IRAs....
Now throw in the federal deficit....
If people lose their retirement money, they lose houses - for most people their home is their biggest investment. Good for us investors, we pick up houses cheap and can rent them out for a while, thereby helping solve the problem.
And as far as the deficite, we'll just print more money.
Quote:
On 2004-11-03 17:34, regal wrote:
And as far as the deficite, we'll just print more money.
Which will drive up the inflation and interest rates and ultimately real estate
ultimatley real estate will be crushed under the burden of higher rates
Yeah, the economy is running on borrowed money. I read an article today that said Americans are now spending $1.04 for every after tax dollar they earn.
It went on to say that it worse in 1950 at $1.06 per dollar. What makes it bad this time is the huge base of baby boomers that should be in saving-mode rather than spending mode.
the average person right now does not see any advantage to putting money into savings for these reasons:
1) savings pays nothing
2) the stock market has been basically flat since 1999
3) With corporate scandals there is fear and lack of trust
Why save when you are not making anything is their thought process. I think people are out buying tangible assets because they feel safer than putting money in the market. If they buy a motorcycle, a home, or raw land, or gold bullion they have something tangible that doesn't go down on their statement every month. So, to them a collectable Harley is a better investment that owning stock in lets say Wal Mart at 24x eps and they get to enjoy the Harley. People are investing not out of greed, but to receive income.
Once we see interest rates get to a normal level- there be a greater incentive to save.
That's not a reason to spend more than you earn, lol.
Don't worry, they're not going to print more money. Brazil, Russia, Yugoslavia...plenty of nations learned that doesn't work, just leads to hyperinflation. I was in Yugoslavia in 1989, and changed money every day, since the dollar bought more dinars every day. I still my million dinar note as a souvenir.
Adapting the logic of the Phillips Curve, inflation is a tax on the wealthy, and we can't have that!
Quote:
On 2004-11-04 20:54, loon wrote:
Don't worry, they're not going to print more money. Brazil, Russia, Yugoslavia...plenty of nations learned that doesn't work, just leads to hyperinflation.
They're not going to print any more money? Where have you been? Since 9/11, the money supply has been increased by 40%. That represents a decrease in purchasing power of 29%. This is nothing more than a way for your government to tax you, without you knowing that it is really a tax. Whoever said they are not going to raise taxes needs some basic economics courses.
The picture for America is very, very bad.
And you are right, baby boomers should be saving, or investing for their retirement. Not spending. But on they spend.
It appears many of them still think SS will take care of them in their old age. HAH! SS is going bankrupt. Only by the grace of Alan Greenspan and pushing back the age of eligibility do we not have it bankrupted yet.
Besides, when that massive wave of baby boomer retirees hit... we're going to have a financial tsunami right here. SS will be drawn out. As will 401K plans (which thankfully are taxed as they are drawn out, saving the economy a little) and IRAs (which are bad for the economy, because the tax is already paid). This in turn will effect the stock market.... which could then go down. This in turn COULD create a panic, because people will want to save their retirement investments...but they can;t because there are some restrictions on 401Ks and IRAs....
Now throw in the federal deficit....
If people lose their retirement money, they lose houses - for most people their home is their biggest investment. Good for us investors, we pick up houses cheap and can rent them out for a while, thereby helping solve the problem.
Real estate is a very good investment.