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Old 06-30-2008, 08:41 AM
 
Location: Central CT, sometimes NH.
3,651 posts, read 5,457,259 times
Reputation: 3924

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The US economic policies do not encourage savings. Over the past eight years our government has decimated the saver through the implementation of policy that distorts the cost of capital through abnormally low interest rates, obnoxiously large federal deficit spending, trade policy that encourages higher rates of imports, and foreign policy decisions that increase funding support from the US.

All that being said, it is what it is at the moment. Let's look at the impact.

Savings:

The average savings account pays 0.5% interest (yes, that's right about 1/6 the erroneous CPI reported annualized 3% rate of inflation).

Let's see at 0.5% your $100 in the bank will only take about 139 years to double (compounded daily)

Maybe you're lucky and with your super saver status your bank is generous enough to offer you 1% .

Hey at that rate it only takes 69 years for your money to double. Okay mom and dad make sure to put that $100 in Junior's savings account today. When he's around 70 he can withdraw his $200 bucks and buy a Dunkin Donuts combo meal and still get change back from his $200. ($5 Combo meal projected cost $152.13 based on continued 5% annualized rise in food prices).

How about a CD. I got excited the other day when I came upon a 8 month special at the credit union that offered 3.3%. Let's see at that rate I'd only need to lock my money up for approximately 22 years for it to double (of course I'd be a fool because at some point one of our elected officials has to acknowledge the real rate of inflation that includes full food and energy cost impact on consumers).

Man I miss the days of the Clinton presidency (from a saver's point of view that is). My good old 8.5% CDs realized me a nice doubling about every 9 years. Hey I even was able to find some 10 to 11% and double my money every 6 to 7 years. Oh yeah and the inflation rate was not all that different from today's "official rate" except that the official rate was actually closer to what my seat-of-my-pants observation confirmed unlike the lies being reported out Washington D.C. today.

Man I love my stock market returns under George W. Yep. Those hedge funds, derivatives, and other products created and exploited under Bush's watch have really benefited the financial planners, fund managers, CEOs, equity brokers, I mean stockholders. What a farce. As pointed out in my post yesterday, the stock market has realized a meager 8.2% over the past 7 1/2 years (10,587.59 1/19/2001 vs. 11,453.42 6/26/2008) since George W. Bush took office.

Yeah but we've been told about the Goldilock's story by Larry Kudlow of CNBC that free market capitalism is the best path to prosperity. Really. Where does free market capitalism exist? Um, nowhere. Never has, never will. The sad reality is that under our current leadership and economic policy the only Goldilock's making the best path to prosperity is happening outside of the US courtesy of Washington D.C. Hey there's plenty of money to be made. It's just that the good money isn't being found here at home in your local businesses and manufacturers.

Let's look at how the presidents stack up in terms of stock market performance:

President - Dow (Entered Office)/ Dow (Exited Office) /Annualized ROR(%)

Jimmy Carter - 968.67 /970.99/ 0.0006%

Ronald Reagan - 970.99/ 2239.11/ 7.08%

George H. Bush - 2239.11/ 3255.99/ 11.35%

William Clinton - 3255.99/ 10,587.59/ 28.15%

George W. Bush - 10,587.59/ 11,346.51 (As of 6/27)/ 0.96%


Will George W. Bush continue his failed economic policies and leave office with an 8 year negative annualized ROR? Only time will tell. Even Jimmy Carter managed to leave office with a 6/10,000 of a percent annualized rate of return. Carter must have believed in the Boy Scout model of "leave no trace." Except that philosophy is better suited to environmental impact than economic growth.

Advice to presidential candidates:

Barack Obama talk to Clinton's advisers and listen.

John McCain when George W's advisers want to talk to you RUN AWAY AS FAST AS YOU CAN!

Enough for now. I'm thoroughly depressed as will be most Americans when they open their investment account statements after the 4th of July.
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Old 06-30-2008, 08:51 AM
 
Location: Central CT, sometimes NH.
3,651 posts, read 5,457,259 times
Reputation: 3924
Now that the big boys have churned their end of the quarter accounts perhaps we will get a temporary reprieve from the 5.9% whacking that the market sustained since 6/20.

Oh but oil and commodities are still behaving badly (unless of course that's your gig.)
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Old 06-30-2008, 09:24 AM
 
Location: Sacramento
13,860 posts, read 24,612,992 times
Reputation: 6587
I agree with your thread title, if not some of the specific sentiments expressed in the discussion.

What I find most interesting, is the fact that we are constantly lectured about our need to be long term savers, so we can take care of ourselves independent of government support, especially in our old age.

Tax policies certainly aren't in support of this goal. Successful savers will ultimately get thrown into higher tax brackets, and I expect their Social Security benefits to ultimately be reduced via "means testing".

Regarding interest rates, the main point in your discussion, they are a free market mechanism. You can invest in mutual fund bond funds and get potentially higher rates of returns.
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Old 06-30-2008, 09:35 AM
 
Location: Londonderry, NH
41,478 posts, read 53,740,052 times
Reputation: 24696
If the masses of America actually started saving enough for their own retirement instead of buying stuff with cash, or worse, on credit, the entire debt driven consumer market for imported junk would completely collapse. If people did not “cash out their equity” to buy the latest SUV status symbol the auto market would collapse. If people didn’t take out funny money mortgages the housing market would collapse.
Fully thing has happened. People are being forced by high fuel prices to stop buying junk on credit, cashing out nonexistent equity and taking out funny mortgages. Now the entire economy is likely to collapse.
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Old 06-30-2008, 09:46 AM
 
2,773 posts, read 3,237,075 times
Reputation: 1050
Because of unrestrained price markups and competition (look at the housing market in the southwest) Americans are trained to neglect savings in order to get a place to live. I recall hearing consumer advice from some magazine about what car or computer to purchase, and they are told "figure what you can spend, then spend a little more to get something that will last"

Americans are taught to simply spend beyond their means. It doesn't help that the banking/credit industry is some ivory tower thousands of miles away, maybe it creates this mentality of distancing oneself from the debt.

Perhaps these giant corporate banks should be removed in favor of more local institutions that offer better assistance to local populations and can be more understanding of local hardship. Perhaps when theres a name and a face, not a corporate logo, the individual feels more need to be responsible and make better decisions about loans and spending limits.

In addition there's the "gotta have it now" mentality (which is the fault of both the advertising industry the credit industry and the people who have no self control) which encourages spending excessively for the latest greatest product on a large credit limit.
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Old 06-30-2008, 03:48 PM
 
Location: Thumb of Michigan
4,489 posts, read 6,954,594 times
Reputation: 2534
Quote:
Originally Posted by NewToCA View Post
I agree with your thread title, if not some of the specific sentiments expressed in the discussion.

What I find most interesting, is the fact that we are constantly lectured about our need to be long term savers, so we can take care of ourselves independent of government support, especially in our old age.

Tax policies certainly aren't in support of this goal. Successful savers will ultimately get thrown into higher tax brackets, and I expect their Social Security benefits to ultimately be reduced via "means testing".
Backwards, uh?!....

Or more like mixed signals from the gov't?!...
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