February 06, 2006
|2005 Worst Year Since Great Depression For US Savings||Economy|
2005 was not a good year. On the global warming front, NASA says 2005 was the latest in the recent string of warmest years on record. And as we saw on Saturday, in just the last few years the rate at which atmospheric CO2 increases has been acclerating sharply, indicating that feedback loops are kicking in.
Economic news seems inconsequential in comparison, but there are ominous signs there, as well: 2005 saw a negative savings rate in the US for the first time since the Great Depression. People are trying to get by on borrowing. AP:
Consumer spending rose at a rapid pace in December, far outpacing income growth, a development that helped to push the savings' rate for the year down to the lowest level since the Great Depression.
The Commerce Department said Monday that consumer spending rose by 0.9 percent in December, more than double the 0.4 percent rise in incomes.
To finance the increased spending, Americans dipped further into their savings, pushing the savings rate for all of 2005 into negative territory at minus 0.5 percent. That was the lowest annual savings rate since a decline of 1.5 percent in 1933, a year in which the country was struggling to cope with the Great Depression. [...]
A negative savings rate means that Americans spent all their disposable income, the amount left over after paying taxes, and dipped into their past savings to finance their purchases. For the month, the savings rate fell to 0.7 percent, the largest one-month level since a decline of 3.4 percent in August.
The 0.5 percent decline in savings for the year followed a savings rate of 1.8 percent in 2004. There have only been three years that the savings rate has fallen into negative territory. The savings rate dipped by 0.9 percent in 1932 and the record 1.5 percent decline in 1933, years when Americans exhausted their savings to try to meet expenses in the face of soaring unemployment as the country struggled with the worst economic crisis in its history. [Emphasis added]
The worst savings year since the depths of the Great Depression, but we're supposed to believe everything's just fine. People are taking equity out of their homes at a furious pace, and now the housing market's starting to cool. It's not going to be pretty.