Originally published January 21 2015
Why the next financial crash will cascade quickly: Most Americans have no savings for any emergency
by J. D. Heyes
(NaturalNews) As a growing number of pundits and financial analysts claim that the United States economy is finally taking off and that nothing but quarterly growth is projected for the foreseeable future, they either are ignorant of one basic fact about Americans' personal economic well-being or are being willfully misleading.
As noted by global financial analyst website Zero Hedge, one underlying sign that "the growing U.S. economy" is having little effect on the most basic levels is the fact that savings rates among most Americans is abysmal -- likely because the rising cost of living has far outpaced income growth:
While various CNBC anchors may be willing to say that the US is "growing gangbusters" yet again confusing the liquidity-oozing equity markets with the economy, there are a couple hundred million Americans who would bet to differ (which incidentally may also explain why the Comcast channel no longer wishes to have its viewership calculated by Nielsen): the reason is that according to the latest Bankrate survey released [recently], more than three in five Americans don't have money in their savings accounts to cover any unexpected bills such as a $500 car repair or a $1,000 emergency room visit.
Most could not cover unexpected expenses without sacrifice or borrowing
Indeed, as the Bankrate survey notes, slightly more than one-third of respondents -- 38 percent -- said they had enough money in the bank and elsewhere to handle the most mundane of spending emergencies. Most of the rest said they would either have to take on new debt to cover such expenditures or cut back spending somewhere else.
In all, according to the Bankrate survey:
-- 38 percent said they could pay the expense from savings;
-- 26 percent said they would have to reduce spending to pay for the expense;
-- 16 percent said they would have to borrow from family or friends;
-- 12 percent said they would be forced to use a credit card; and
-- 8 percent responded that they would pursue "other" means to pay the expense.
The Wall Street Journal (WSJ), citing the Bankrate survey, reported:
The weak safety nets appear to stand in contrast to the survey's finding that 82% of Americans keep a household budget.
"A solid majority of Americans say they have a household budget," Bankrate banking analyst Claes Bell said, according to WSJ. "But too few have the ability to cover expenses outside their budget without going into debt or turning to family and friends for help."
Zero Hedge noted that, based on the data, it was clear that most Americans have no more than a month or two worth of cash reserves and are actually living paycheck to paycheck -- not really a surprise, when you consider historical trends.
"Inquiring minds want to know"
What is surprising, the site noted, was that the biggest reason why the U.S. economy was portrayed as being as strong as it was during the second and third quarters is "because the Bureau of Economic Analysis decided to revise U.S. household income lower and spending higher, not once, but twice..."
That resulted in a boosting of third-quarter gross domestic product higher to 5 percent, but only because the BEA estimated that U.S. savings rates were reduced by $140 billion by September 30, the end of the third quarter - a 20 percent reduction in the estimated savings amount held by American consumers.
"Which begs the question: just which savings are Americans said to have drawdown by $140 billion more than in initial estimates: the ones they don't currently have or the ones they can't ever hope of having?" Zero Hedge stated. "Inquiring minds want to know."
As a side note, personal savings rates skyrocketed in the wake of the Great Recession but by 2012, according to The Huffington Post, began falling again.
Sources:
http://www.zerohedge.com
http://blogs.wsj.com
http://www.bea.gov
http://www.huffingtonpost.com
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