What Economic Recovery? Most Americans Lack $1000 In Savings

He who is plenteously provided for from within needs but little from without.
Johann Wolfgang Von Goethe

What Economic Recovery

A key sign of financial health is savings; if one does not have a decent amount of money tucked away for a rainy day, it is a sign that all is not well. Americans have a tough time sticking to a budget and saving compared to their Asian counterparts. This is reflected in the startling revelation that over 62% of Americans do not even have $1000 in their savings account. Foreigners are shocked when they discover that Americans have so little money saved for a rainy day.

“It’s worrisome that such a large percentage of Americans have so little set aside in a savings account,” said Cameron Huddleston, a personal finance expert and columnist for GOBankingRates. “It suggests that they likely don’t have cash reserves to cover an emergency and will have to rely on credit, friends, and family, or even their retirement accounts to cover unexpected expenses.”

If 62% don’t have $1000 or more, what will they do if some misfortune should strike? Hope that some Good Samaritan throws money on their laps. Many Americans are having a hard time, but if one examines some of the things the typical American family purchases, one will note that many items would fall into the category of non-essential’s.

What Economic Recovery? Overspending Leads to Financial Ruin.

Spending money you don’t have on junk you don’t need to impress people you don’t even like is a perfect recipe for disaster. Americans have never learned to live within their means, and with the economy in disarray, they should be living one to two levels below their standards. In general, putting money into a savings account amounts to folly, as the current set-up (due to ultra-low interest rates) favours speculators, but a small portion of those funds you save should be put away as something to fall back. In that sense, not having $1000 to fall back on is a real tragedy.

The image below illustrates savings balances by income

The Economic Recovery In China is Different

The situation in China, on the other hand, is quite different; in one of our recent articles, of which an excerpt is posted below, we illustrated how many Middle-Class Chinese have $50,000 or more in savings.

According to Credit Suisse, 109 million Chinese citizens have a savings network ranging from $50,000 to $500,000. This momentum has been gaining since 2000, with China’s middle class growing at twice the rate of the U.S. Rather than measuring income, Credit Suisse measured wealth to avoid factors like unemployment. This reveals a stark contrast between China and the U.S, where the average worker has less than $5,000 in savings.

As China’s wealth continues to increase, they are well on their way to becoming the world’s number one superpower. Currently, China has over one million millionaires and is creating them faster than the U.S. With the most billionaires in the world, it’s only a matter of time before they also have the most millionaires.. Full Story

Conclusion

This economic recovery, as we have stated so many times over the past few years, is illusory in nature; the main driving force behind this economic recovery is hot money. The Fed has decided to try something new; maintain ultra low-interest rates indefinitely and, in doing so, force corporations and individuals to speculate. Hence the record sums of cash deployed into share buybacks over the past six years. Eventually, the US will be forced to embrace the negative rate bandwagon, fostering even more speculation.

Translation: the Fed will not raise rates; they are probably getting ready to lower them. Negative rates will create a new trend in speculation, probably the likes of which we have not seen for a very long time. All those individuals who have sat on the sideline cursing this bull market will eventually be forced to embrace it, as speculation will be the only avenue left to preserve one’s wealth. Hence, every strong pullback has to be viewed through a bullish lens.

A simple strategy would be to buy when the masses panic and sell when they are euphoric. In simple terms, this means, strong corrections should be viewed as buying opportunities until the trend changes.

Nothing is enough for the man to whom enough is too little.
Epicurus

Only 39% of Americans have $1000 For Emergencies

According to Bankrate’s latest financial security index survey, 34 per cent of American households experienced a significant unexpected expense over the past year. However, only 39 per cent of survey respondents said they could cover a $1,000 setback using their savings.

“While tapping savings to pay off an emergency was the most common response, more than a third of Americans would sink into one type of debt or another, potentially harming their financial security,” Bankrate says in the report.

Chart assett: Bankrate $1,000 emergency savings

“I discovered that people would stop their whole Total Money Makeover because of an emergency — they felt guilty that they had to stop debt reducing to survive,” he writes. “If you use debt after swearing off it, you lose the momentum to keep going.”

“Go back to 2007… You lost your job, you lost everything, you were working on this tech thing, and all the startups went down,” she said at the eMerge Americas conference in 2017. “Nobody had any money to invest, nobody wanted to touch anything, nobody wanted to IPO because the markets were going down and you couldn’t find anything to do. Think it took you just three months to find another job? Think it took you six months to find another job?” Full Story

Does This look like an Economic recovery?

Hundreds of thousands live without a paycheck amid the longest government shutdown in history.

As a result, federal employees and contractors are digging into their retirement savings, filing for unemployment, picking up other jobs and being unable to meet their rent or mortgage payments. Full Story