Net worth of Americans drops dramatically (loan, borrowing, mortgage, paycheck)
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One key difference. Unlike 1992 what money you have left in the bank is earning next to 0%. It's time for the Fed to stop the near 0% funds rate. It is unrealistic and is not promoting economic growth.
Low interest rates have done more damage than good over the past decade for the majority of Americans. The "free money" mentality has resulted in overly risky financial maneuvers in an attempt to achieve a historical "normal" rate of return. Retirees have lost the ability to live off of accumulated savings that they traditionally had deposited in savings accounts, money market accounts, CDs and government bonds. Instead they have had to become overly exposed to equities or are seeing bond returns that a fraction of stated inflation rates and significantly below real inflation rates.
I listen to Peter Schiff the other day on MSNBC with Chris Hayes. Schiff made many of the same "cheap money" arguments stating that the Fed must increase interest rates for the longterm health of the economy.
I don't see anything not expected with the loss of wealth in values of homes or the loss in investment accounts.Many have even loss savings or their homes by losing jobs.
One key difference. Unlike 1992 what money you have left in the bank is earning next to 0%. It's time for the Fed to stop the near 0% funds rate. It is unrealistic and is not promoting economic growth.
Low interest rates have done more damage than good over the past decade for the majority of Americans. The "free money" mentality has resulted in overly risky financial maneuvers in an attempt to achieve a historical "normal" rate of return. Retirees have lost the ability to live off of accumulated savings that they traditionally had deposited in savings accounts, money market accounts, CDs and government bonds. Instead they have had to become overly exposed to equities or are seeing bond returns that a fraction of stated inflation rates and significantly below real inflation rates.
I listen to Peter Schiff the other day on MSNBC with Chris Hayes. Schiff made many of the same "cheap money" arguments stating that the Fed must increase interest rates for the longterm health of the economy.
this is so true! How are people especially the one's who count on that interest to live and not touch the saved money (principle) lets say if they are in their middle 60's and may live to 90! Of course they are going to have to eat up the principle, this is a big problem.
Many people are still under the illusion that they can afford stuff as long as they can make monthly payment for it. My friend whose salary is not good recently bought a Mercedes while he should have purchased Toyota Corolla instead. kids in college need iphones, ipad and all the gadgets while their earning is not that much. People dont seem to care much about their low income as long as they are able to take loan to satisfy their desires. Many people whose low income means they should have lived in apartments closer to their place of work and relied on more public transportation went on the have mansions in suburbs and long commute to work in SUVs just because they can afford the payment towards house and cars. our salaries did not rise enough but our expenses in health care, transportation, food have risen a lot in last 20 years.
Many people are still under the illusion that they can afford stuff as long as they can make monthly payment for it. My friend whose salary is not good recently bought a Mercedes while he should have purchased Toyota Corolla instead. kids in college need iphones, ipad and all the gadgets while their earning is not that much. People dont seem to care much about their low income as long as they are able to take loan to satisfy their desires. Many people whose low income means they should have lived in apartments closer to their place of work and relied on more public transportation went on the have mansions in suburbs and long commute to work in SUVs just because they can afford the payment towards house and cars. our salaries did not rise enough but our expenses in health care, transportation, food have risen a lot in last 20 years.
You're right but it's a paradox. All that living above our means is what fuels the stock market which = everyone's retirement and 401ks etc.
That wealth was illusory and based on inflated home prices, not true wealth. Now that home values have come back down to earth, however, there is still the debt that many incurred using the stratospheric, unrealistic home valuations. So what we are looking at here is a balance sheet problem, one that cannot be resolved with a few quarters of economic growth. Instead, for household net worth to grow, people will have to simultaneously save money and wind down debt. There's just no way around this.
I am willing to wager that household wealth inflation adjusted is substantially lower than it was in say 1992, prior to the housing bubble.
There are many people who had home equity, good jobs, and substantial investments that have been lost since then.
Not to mention that much of the present lifestyle people are living today is financed with massive amounts of debt. That was not the case prior to 1992.
This article states that the wealth of the average American has fallen back to 1992 levels. The real problem with that is that what a dollar would buy back in 1992 now takes $1.65.
Yet single family houses are selling for half million to a million dollars a piece or about 4 times their 1992 levels here in Southern California and realtors say this is the most "affordable" market ever.. makes a lot of sense, NOT!!
With low interest rates and easy access to credit via government channels (FHA, Student loans etc.) and bailouts galore, the Obama government has created a HUGE Moral hazard... and Obama wants to do even more damage with his policies...
Well lets solve the problem by attacking the unions and driving wages down further!! Next to Real Estate the 401K has proven to be the biggest Ponzi Scheme in history. If Chase can loose billions on the market what chance do you and the eTrade Baby have. Next is the myth that everyone needs to accumulate debt going to college. With all of the debt out there austerity will bring the economy to a halt.
Raise the Minimum Wage, put a floor under Social Security $1,000 a month should be the minimum any retiree should be getting. Put money in the hands of those who liive paycheck to paycheck
Put money in the hands of those who liive paycheck to paycheck
Susan makes $30k/year, has a roommate to share her apartment, cooks at home, drives a 2003 Honda, so lives under her means and has managed to build up some savings.
Mike makes $50k/year, has his own place, eats out all the time, buys a new BMW every three years, so he seems to never have any money and is rushing off on Fridays to cash his paycheck to cover bills.
You propose we put more money in the hands of Mike?
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