Cycloptichorn wrote:Quote:How does on do "negative savings"?
It means that Americans are borrowing more than they are saving, ie, the savings rate for the country is at a net negative. In fact, the national savings rate is the lowest it's been since the Great Depression. This is a clear signal that the economy isn't doing well at all.
A true observation, but it doesn't capture the entirety of the debt situation.
Fact is, credit is just plumb easier to get these days. Part of that reason is certainly because lenders are a lot looser with the purse strings, and individuals who probably should not be extended large amounts of credit can get it. That's, y'know, bad.
At the same time, it's also easier to get because of the introduction of modernity into the banking system. Time once was where you couldn't pass an out-of-town check at the grocery store. Nowadays, your credit records are easily available, so a bank doesn't have to have a long-standing relationship with you to determine whether you're a good credit risk or not. They can just pull up your credit record and play the numbers.
This also means that a number of loans are made to less-than-worthy borrowers with the full knowledge that not all of 'em are going to be paid back. In a way, it kind of takes some of the stigma out of bankruptcy. Instead of being reflective of your personal failure to take responsibility for your finances, it's just you being one of the unlucky folks in the aggregate that the company already took into account...
So if we posit that (a) there was always more demand for consumer credit than supply, and the supply was largely limited by banks being unwilling to make loans with only partial information, and (b) that modern banking systems mean banks can get full information quickly, then you'd expect the result to be a general rise in the level of consumer borrowing.
Of course, that doesn't mean it's necessarily healthy in the aggregate - especially because it adds to inflationary risk; if everyone's a debtor, and there's very few lenders, there's a real temptation to just run up a lot of currency. Sure, there's some short-term disruption, but boom, your debts will be reduced to a fraction of their former value! (Not advocating this policy, obviously. But I don't advocate massive deficit spending either, and goodness knows that still happens...)
On the other topic, here's a question back at you, Cyc... Do people living in other countries have the right to vote for the US presidency? After all, it is the most powerful political position extant in the world. Do foreigners have the same rights as American citizens in this respect? (And if not, then why would they automatically have the same rights in other respects? Do explain, please.)
