U.S. NEWS: In 2005, Americans were reported to have negative savings for the first time since the great depression. In other words, Americans as a whole were spending more money than they made; a little trick we learned from our government. Who, by the way, claim no responsibility…for anything.
The negative savings has continued every year since and certainly will set an impressive new record this year, unless saving for a full tank of gas is added to the government spin data.
Why are Americans not saving, considering the astute guidance and tutelage that we currently enjoy from our nations capitol? With leadership statements from none other than George Bush himself saying, “I certainly hope people go out and spend their tax rebates rather than saving them.” What more could we ask?
This is one of those mornings that I look around at our leadership and want to use a whole paragraph of those words that I learned in the Navy; but I won’t. I’ll restrict myself to Mikemathics.
The Fed will no doubt not disappoint my prediction of some months past and continue to reduce the federal funds rate to 2%. They have already brought my prediction of printing up car loads of brand new hundred dollar bills to reality. So what does this do to your money and your savings?
An example of applied Mikemathics will nicely demonstrate that saving dollars is like saving apples; it’s a rotten proposition. Once you see the following example (in the privacy of your home), you can use those words that I learned in the Navy.
Let’s say that you put $1,000 in a savings or money market account. And under the present circumstance of low interest that is going lower, your annual interest may reach a whopping 2.5% or a staggering annual return of $25.00, better known as a quarter tank of gas.
But wait, we forgot to figure in inflation and devaluation of the dollar which conservatively is running a strong 6%. Reducing your new found windfall profit of $25.00 combined with your original principle of $1,000 by 6% (to represent the annual fall in purchasing power), now leaves you $963.50, or a net loss of $36.50.