Banking

End of the Savings Boomlet? (Bonus David Lazarus Plagiarism)

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I'm pwe-appwoved!

November personal income and outlays data are out from the Bureau of Economic Analysis, and with that release comes the return of the mythical consumer-driven recovery.

CNN says it's "good news for the recovery" that spending has ratcheted up slightly faster than disposable income. America's second-rated cable news channel refers vaguely to "economists" who expect income to keep rising and lead to a spending-driven upturn.

The BEA also has personal savings rates down for the month. As I explained way back when, these month-to-month changes don't actually tell us much, because they get substantially revised in subsequent months.

I'm David Lazarus, and I have love to give.

But one person is definitely saving—time and effort, that is. The L.A. Times' David Lazarus cuts and pastes that CNN story without quotation marks or blockquoting. It's just a blog post, and Lazarus' dangerous life of rescuing consumers from evil corporations that want to sell them goods and services doesn't leave a lot of time for niceties. He also provides a link to the original story. Still, it's not cricket to put in chunks of text some other hack wrote without setting it off in a way that's clear to a casual reader.

The month-to-month drop in personal savings, if it holds up on revision, ends a generally pro-saving trend in the BEA stats that has lasted about a year. A second opinion, drawn from Federal Reserve data, says that trend was bogus, and in any event it was going to end sooner or later. The indispensable Bill McBride of Calculated Risk suggests the savings boomlet has largely passed us by, and in his polite and circumspect way he notes that the return to stupid spending can't be described simply as "good news for the recovery." Calculated Risk:

When the recession began, I expected the saving rate to rise to 8% or more. With a rising saving rate, consumption growth would be below income growth. But that 8% rate was just a guess. It is possible the saving rate has peaked, or it might rise a little further, but either way most of the adjustment has already happened.

There is still a long way to go. I'd like to see personal income less transfer payments above the pre-recession peak, and I'd like to see personal consumption not growing faster than personal income.

Should you hold onto your depreciating dollars or spend them now on something that will hold its value a little better? Buy Edsel; they ain't making any more of the stuff.

And here's another sobering chart from Calculated Risk: Job loss severity in postwar recessions. As you can see, this one is the by far the worst, and it's on track to being the longest. Good times!

You can practically taste the consumer-driven recovery with your eyes.

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  1. spending has ratcheted up slightly faster than disposable income

    GODDAMIT, is it possible for me to check my online banking PRIOR to my recovery spending, ARGHGHGHG.

    1. (jus’ too busy savin’ the economy, 1 pizza at a time.)

  2. channel refers vaguely to “economists”

    Could be bloomberg consensus estimates?

    1. Yeah, I didn’t see this as vague either. They mentioned a senior economist, in any case.

  3. Lazarus’ alt text might be the best yet.

    1. If by “best” you mean “most likely to haunt your dreams.”

    2. It definitely wins the alt-text cup for the day.

      1. Over Mary Worth? That’s tough.

        1. Fucking time travel gets me all mixed up…

  4. Question: why should I save when the value of my currency will inevitably decrease?

    1. to delay consumption?

    2. It’s time to be patriotic … time to jump in, time to be part of the deal, time to help get America out of the rut.

    3. To invest in something that will (at least) keep pace with inflation?

      1. Which is…..

        1. Shyeah. Like I’d tell you.

    4. There are several possibilities:

      (1) Because the expectation value of having the cash when you unexpectedly need it, e.g. accident, illness, job loss, exceeds the expectation value of the loss due to inflation. For example, you should save $1000 even though it will only be worth $950 next year if there is 5% or greater chance that you’ll need $1000 in cash suddenly sometime during the year. You can look at the $50 you pay as the “premium” for taking out “insurance” against the loss.

      (2) Because it is sufficiently more expensive to finance big purchases by credit than by savings. For example, suppose inflation is running at 5% but you can only borrow at 12%. To oversimplify a bit, if you buy a $10,000 widget now and borrow the money, paying it back a year later, you will pay $11,200 in next year’s dollars, which is about $10,640 in this year’s dollars. On the other hand, if you save up and buy the widget next year in cash, you’ll only have to save up $10,500 of this year’s dollars, since the price in next year’s dollars will be $10,500. In this case, your losses to inflation are taking the place of paying someone else interest. Indeed, interest in general is partly just compensating the lender for the erosion by inflation of the value of the principal you borrow, with an extra bit thrown in to cover the risk of default. In this case, you’re simply absorbing the inflation losses yourself, instead of paying someone else to do it. Since you don’t have to pay yourself for the risk of default, you should generally come out ahead by saving up for big purchases, unless someone is lending money at stupidly low rates (which they sometimes do of course).

      (3) Because your income will drop faster than inflation. Say you’re having a banner sales year this year, and will get a $100,000 bonus. There’s no chance at all you’ll get a similar bonus next year. Saving some of the money makes good sense, even though it will lose value due to inflation, because the marginal value of a dollar to you personally next year will be substantially higher than it is this year. In this case, your losses to inflation constitute another “insurance premium” that allows you to guarantee yourself an extra bit of income next year.

      (4) Because the prices of the particular things you want to consume will rise slower than inflation in general, or even fall. For example, you want to buy a house, and although inflation in general is running at 5%, the prices of houses is expected to fall by 10%. You could use your $50,000 in savings to put 10% down on a $500,000 house now, or you could wait a year so that the same house costs $450,000 in today’s dollars, and your savings have decreased to $49,500 in today’s dollars, and put down 11%. That is, although the general value of your savings will have gone down by 5%, the amount of house it will buy will have gone up.

      But in general your question is a red herring. It’s easy to make savings and spending decisions when the rate of future inflation is known and stable. But as a rule the future rate of inflation is not known, and not exactly stable, and there’s the rub. It’s profoundly difficult to guess whether a 5% mortgage is going to be a great deal or a lousy deal in 10 years’ time.

      1. “On the other hand, if you save up and buy the widget next year in cash, you’ll only have to save up $10,500 of this year’s dollars, since the price in next year’s dollars will be $10,500. In this case, your losses to inflation are taking the place of paying someone else interest. ”

        Except that it usually takes more than one year for somebody to save up for large future purchases. If inflation is 3%, and I’m trying to save up 500 dollars a year for 35 years, my first twelve years of saving will lose half or more of its value during my savings period. Plus, I have to hope and pray that my wage keeps up with inflation, which is never a sure thing.

        1. “Because the prices of the particular things you want to consume will rise slower than inflation in general, or even fall. For example, you want to buy a house, and although inflation in general is running at 5%, the prices of houses is expected to fall by 10%. You could use your $50,000 in savings to put 10% down on a $500,000 house now, or you could wait a year so that the same house costs $450,000 in today’s dollars, and your savings have decreased to $49,500 in today’s dollars, and put down 11%. That is, although the general value of your savings will have gone down by 5%, the amount of house it will buy will have gone up.”

          Um, I’m pretty sure that the price of those goods and services would have fallen even more without the inflation. Hence, savings is still discouraged by inflation.

  5. Buy Edsel

    Good advice.

    I bought one a couple years ago, when I was de-cashing myself. Non-collector, like-new exterior, new engine, about 1/5th the price of a decent new plastic car. It runs great, and it looks weird enough that it scares people at night.

    So I’m ready to look serious on the post-apocalyptic ROADS.

    1. So I’m ready to look serious on the post-apocalyptic ROADS.

      I would rather drive an Expedition. Pretty sure I can convert one into a technical without much trouble

      Seriously between the expected driving over zombies and the atomic sized pot holes how far will you get before the post apocalyptic roads rattle your rust bucket into dust?

      1. Unimog.

  6. David Lazarus Plagiarism

    Is this a throwdown?

  7. The L.A. Times’ David Lazarus cuts and pastes that CNN story without quotation marks or blockquoting.

    Wow. Not only is he too fucking lazy to even write; he’s too lazy to find someone good to steal from.

    Maybe he was parodying it, so it would be fair use. (Warning – blog pimp alert!)

    1. No one minds your blogwhoring, BP, because, well, you’re actually funny. As for other, unmentioned blogwhores…

  8. I think is see a double did in those numbers.

    10$ says i can find a similar double dip in housing prices.

    Who knew Obama had his own W?

    1. The Calculated Risk site has another graph with the Census temp employment taken out and it smooths out the curve. No double dip, but a long slow recovery.

    2. That there pointiness is your Summer of Recovery.

  9. And here’s another sobering chart from Calculated Risk: Job loss severity in postwar recessions. As you can see, this one is the by far the worst, and it’s on track to being the longest. Good times!

    God DAMN that Bush deregulation!

  10. Anyone else notice that these things have been drawn out over a longer period of time the last 20 years? At the rate we’re going, that line probably won’t get back to zero until after 2015, at least–and that’s presuming there’s no double-dip.

    Considering all the job losses, you have to wonder where all the jobs are going to come from to not only keep up with population growth, but bring back the old jobs on top of that. The 90s were saved by the dot.com bubble, the 2000s were saved by the housing bubble; I don’t think the “high speed rail and green jobs” bubble is going to have the effect Obama expects it to.

    1. “…you have to wonder where all the jobs are going to come from to not only keep up with population growth, but bring back the old jobs on top of that….”

      It’s a given that markets like stability, and the combination of government debt (likely higher taxes), Obamacare (likely higher employment costs) and those taxpayer-supported jobs you mention (likely higher taxes) sure doesn’t offer that.
      Until at least some of that is ‘stabilized’, I’m guessing most employers are going to sit on their hands.

      1. It’s a given that markets like stability

        But it is stable. You can predict what’s going to happen and it all sucks the big one.

        Whadda ya want, anyway?

      2. I suppose it would hinge on what you’re referring to by “markets,” in this instance, but when you look at what’s going on right now, it’s pretty surreal. The media was cheerleading the DOW 12K milestone, even though there’s no substantive reason for the stock market to be that high–not when 1/5 of the country is on food stamps, 2/5 have been out of work for over 27 weeks (and that’s the ones who are being counted under the current bullshit metric, not the ones who have fallen off the rolls), the U3 is stuck at over 9%, initial claims have been stuck at over 400K for months, the employment/population ratio is double-dipping, revolving credit continues to drop, gold has gone from about $800/oz to $1300/oz in two years, and commodities are going through the roof.

        I mean really, is there ANY industry in this country that’s going to make those numbers better, even in the long-term?

        1. “I mean really, is there ANY industry in this country that’s going to make those numbers better, even in the long-term?”

          I was referring to the labor market; the equities market is always subject to the ‘greater fool’ effect.

    2. I don’t think the “high speed rail and green jobs” bubble is going to have the effect Obama expects it to.

      I don’t think Obama is going to have the effect Obama expects himself to.

  11. Jesus, Tim. Cut Lazarus a break on the plagiarism. He works for the LATimes, which means he is at least semi-retarded and incapable of an independent thought.

    In that same vein, I wonder if Tony, Chad or OhioOrrin are looking for work. They’d fit right in to their intern program.

    1. Uh, hang on sloopy, I think Tim worked for the Times.

      Unless that was your point…

      1. I think Tim will cop to being at least semi-retarded.

        1. Shit. Then I better stop plagiarizing him. I mean, think how that’ll make me look.

          1. Actually–and I’m a lawyer, so I can’t possibly be wrong or even safely questioned–plagiarizing plagiarizers cancels out the sin.

        2. He did vote for Obama.

    2. Just wait until we have better intelligent agents for handling searches. Then you can simply ask it to tell you who your favorite hack is ripping off today.

      I love the future.

      1. Will thy tell you whose searches they’re ripping off?

        Google says Bing is copying their search results.

    3. FWIW, I think Lazarus’ linking the CNN story is evidence that he wasn’t plagiarizing with malice aforethought. Most likely it’s part of that mentality that if it’s just a blog post you don’t have to put in as much effort.

      But note that Chris Anderson was dinged with a plagiarism charge for doing the same stuff with public-domain material he had footnoted in his book. If an href provides some legal clearance that a footnote that does not, I haven’t heard about it (and I’d be surprised if that’s the view of the Times‘ legal department, given that it was like pulling teeth to get the paper to allow the limited amount of hyperlinking it does now).

  12. Ah, fuck it. The “Towelie” level comments I make give away my tardery.

    1. Have you been wondering around for the past couple of weeks, you know, helping people out with towel safety and proper towel use? It’s important.

      1. CARTMAN: “You are the worst character ever, Towelie”

        TOWELIE: “I know.”

  13. So Tim, what are you going to do when one of these dead green shoots actually lives to puberty? You’ll be out of a job.

  14. Not only is Lazarus plagiarizing CNN, but apparently he’s trying to usurp David Boreanaz’s face.

    1. No way, Egon Spengler has been beefing up.

      1. What have you got left, Egon?

  15. After first reading Lazarus regularly a dozen years ago (at the SF Chronicle) I recall coming to the conclusion that he thinks the jury is still out on capitalism vs the other ‘isms’ that have been tried. Reality is completely different from the guy that sells your house, David.

  16. It’s simple: People will save when they have money left over.

  17. I thought about buying a computer today that I can’t afford, but ultimately declined. I just wanted to apologize personally for letting America down.

    1. you bastard

    2. Funny, I passed up a good deal today also thinking, my old piece of shit still works.

  18. OK this really does make a whole lot of sense dude, Wow.

    privacy-tools.au.tc

  19. Non-sequitir here, but don’t the reports of spontaneous crowd and crime control in Egypt sound like a ‘tarian dream?

    1. Sure, if you’re the anarchist type of libertarian. And right around the corner we have their nightmare: Somalia.

      1. Am i the only one who saw the weirdness of this?

        It is like if in the US government suddenly evaporated so the first thing poeple do is spontaneously form a planning commission and start zoning property.

        I don’t know perhaps the pat downs are really needed….but even if their was a big threat how hard would it be to sneak through it around it over it or under it?

        My guess is it would not be hard at all to sneak past it and the only poeple they are patting down are the poeple who are not a threat.

        It is like a cargo cult ritual.

  20. I love the Printapons website. It is so convenient and easy to use. It’s coupons are great and there are sooo many. 5 stars all the way.

    1. Printable tampons are just a last desperate gimmick to salvage the print media industry.

  21. Well, I have been saving like mad becuase I will most likely be out of a job soon. ObamaCare has made it virtually impossible to run physician owned hosptials and guess what industry I’m in.

    I’m in line for the chopping block, so I have been saving every penny – hoping I have enough to ride out the storm.

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