Wednesday, June 10, 2009

Negative savings rate for the first time since 1931

“Due to federal government spending, for the first time since 1931 the US economy is reporting negative net national (personal + corporate + government) savings. In 2008, the negative savings were -$124.6 billion or 0.94% of GDP. In Q1 2009, the negative savings were -$183 billion or 1.3% of GDP.”

This is ominous for a whole host of reasons, but three key reasons come to mind:
1) US savings rates have soared and still can’t cover the spending by the drunken sailors at the helm
2) Loss of the ability to generate wealth is not just a game of numbers, but is sparked by numerous disincentives to produce wealth in the first place and can self-feed. Does anyone remember Atlas Shrugged? In Rand’s brilliant novel producers when on strike because they got tired of the parasites stealing their wealth for the “masses.”
3) Proves that this team in power has little respect for the market and its ability to heal itself by cleansing away the excess baggage. Every connected political crony needs to be saved, according to this crowd.
So, as they say: “How’s that hopey-changey thing working out for you?” If you are a Federal government employee or one of the masses being “saved” by your government through the confiscation of others wealth, or you know nothing about how the market works, then you are likely loving hopey-changey. But those who have worked 7-days a week for many years to build businesses all over American are hoping we can get some changey very soon!

from:Jack Crooks
Black Swan Capital LLC

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