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September 1, 2005
Negative savings is a reality, Thurs., September 1, 2005, 10:05 AM
What the world is seeing today from scenes of the disaster at New Orleans is the televised reality that America is not all rich and powerful. It is to me in fact a validation of my naming my blog, Capital Markets and Social Equity".
These people in the midst of the horror are poor, they have been assaulted, and now they are scared.
I suspect these images of American have-nots will resonate with the more fortunate, and that, yes this time, for the first time, America will change its ways.
The crisis of 9/11 was in large part an attack against America's well-off people who worked in the bastions of global power, the Twin Towers and the Pentagon. This natural disaster, Katrina, however, is an attack on those who are not well off.
Together, Katrina-9/11 is a tale of a split society.
America needs now to pull itself together, which it can only do if its basic ways are changed.
Since I started this blog, I have railed against mass media perpetuating myths, which they do in order to support advertising, which in turn aids the rich and powerful. It is a fact that critically serious matters, like war and capital markets, have been reduced to fictional entertainment.
This morning there was another dose of reality put into the mix. U.S. personal savings over a month has gone negative for the first time since the month that followed 9/11, and only the second time in history. What that means is that to sustain a level of personal purchases, consumers must use more than personal income; they have to dip into accumulated wealth.
They are not doing so willingly or for ‘conspicuous consumption'. Negative savings is a clear sign that the economy is failing the people. More haves are becoming have-nots, in America.
In China and India and Russia, for example, that situation is quickly reversing. More have-nots there are becoming haves. And they are coming to America to buy the companies and the real estate of Americans " because they can afford to. And Americans have to sell out because they cannot afford to sustain their present lifestyle without selling some of their accumulated assets.
Yes, negative savings in America is a reality this month, like the devastation left behind by Katrina.
But the most shocking truth is that, according to the Commerce Department, the U.S. saving rate, which is the pct of disposable income people save, was a negative "0.6. And that is the worst in history, or at least since records have been kept in 1959.
That is what is happening to the majority of people in America. But, as I have been writing in this blog, America is also going through the greatest transfer of wealth to the wealthy in its history. The Forbes List of American billionaires is growing fast, and the average wealth of those people is ballooning.
At the same time, the jails in America, housing mostly economic crime, are bursting at the seams, the border with Mexico is being over-run, and the walls around the gated communities of the haves are having to grow higher.
I could continue to paint a negative picture here, but I no longer really need to.
I was thinking about this last evening. I think that the Big Easy, America's Party City, now in ruins, having to be re-built from the ground up, is showing everybody the way.
Economic renewal based upon a means test, a reality check, is the way out of America's dilemma. And I think that's about to happen. I think the American public is going to demand it.
And you know the precise point that hit me? It was watching Jack Cafferty on CNN last evening pleading for the rest of the world to come to the aid of America.
And, I thought, that was the bottom. The proud American people may be down and hurting today, and having to dip into savings, but they are not going to accept beggar status.
Not ever.
Posted by Posted by Bill Cara on September 1, 2005 10:07:40 AM | Category: Economics
Discourse
Bill, That was wonderful about New Orleans. I read it to my wife and she made a very adroit comment. What's the media focusing on? The poverty stricken, destroyed by this storm which is likely exaserbated by CO emissions? Hell no. The looting. The poor going into Wal-Mart and taking the stuff that's going to be ruined anyway. Ask any of her friends. They're outraged. The media may be more powerful than this storm!
Brooke
Posted by: Brooke Stevens at September 1, 2005 11:17 AM [link]
Great post Bill (and Brooke). I've been discussing the '3rd world' (I hate that term!) images coming out of New Orleans with some friends of mine. I think it's about time that the rest of the world sees that, yes, there are poor people in the U.S., and it's not all peaches and cream over here.
I won't even get started on the media coverage and especially the comments of the anchors/reports on Fox news...
A friend sent me this link about 'destroying FEMA' that you may find interesting - http://www.washingtonpost.com/wp-dyn/content/article/2005/08/29/AR2005082901445.html?sub=AR
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New Orleans has been on life support for fifty years. The land is subsiding. The course of the Mississippi is changing away from Baton Rouge and New Orleans. The Army Corp of engineers has been fighting these major forces of nature since the '50s. It's a losing battle.
None of this has anything to do with George Bush or global warming.
Posted by: Fred at September 1, 2005 2:31 PM [link]
Bill, just started reading your blog a few weeks ago. Wonderful!
I want to comment and then disagree with something above:
First, we were in New Orleans for the first (and maybe the only!) time last January. Had a wonderful time, beautiful weather, loved the place. Wanted to go back. I remember well, though, that the nice lady who gave us the Gray Line Tour spiel told us how a hurricane would take out the city, and even without it, it would not be there in 50-100 years because of the encroachment from the sea.
More importantly, I disagree with what you wrote above, though honestly, I hope YOU are right and I am WRONG: "And you know the precise point that hit me? It was watching Jack Cafferty on CNN last evening pleading for the rest of the world to come to the aid of America.
And, I thought, that was the bottom. The proud American people may be down and hurting today, and having to dip into savings, but they are not going to accept beggar status."
What proud Americans? Have you watched what's on TV? Not the news channels, but the cable channels? Do you drive around the major cities? It's not only New Orleans that is going down, it is most major cities, due to the many irrational and horrible economics of greed, bad governance etc. The middle class just tries to get by, the welfare class sits idly and the rich try to get the government to pass laws to protect their wealth sources. I am a capitalist, and think the playing field should be fair...get rid of mercantilist policies, bad governance and the entitlement state...but the question is, how do you do that, because these are ATTITUDES fixed in the minds of many...maybe most (though here is where I hope I am entirely wrong).
I work in an Emergency room in the Midwest...and you can't believe the depredations I see all the time, and the "I don't have to pay for anything" attitudes, the complete lack of common sense, the increasing birth rates (contrary to what is published) in teens...and the general economic and political ignorance about EVERYTHING in the populace-at-large and you have a recipe for disaster.
We can blame our politicians (and I will!), but ultimately, we have to blame ourselves for doing nothing but pushing our pols OR ignoring it when they do that which we find reprehensible or outright stupid.
We plead to Washington or to our state and local legislatures to save us. We already are beggars, as we are at their mercy. At least that is the prevailing attitude I hear. Most I know say "what can I do?", and they go back to the TV, peruse the ads at Wal-Mart and drink beer after a hard day at work.
We are a beggar nation, and so we shall remain unless there is not only a change of heart, but a change of will, the desire to change the status quo, to fix what is wrong. And I see nothing to indicate that.
Look at the blame-slinging. Yes, there is blame a'plenty to go around for the N. Orleans fiasco, but that seems to be the modus operandi of our pols. Attack, blame...not fix and make well our fractured, ailing country. It's a big game, and we are the losers.
Posted by: Maurice Sonnenwirth at September 2, 2005 3:16 PM [link]
nice write up Bill of the current situation...where do we go from here? I woke up this morning to $1.25 gas prices (CDN)!
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at
September 1, 2005 10:54 AM [link]