USA: Lowest Savings Rate?
Or Hidden Assets?
What's Ahead, 2000-2010
USA: Lowest Savings Rate?
Or Hidden Assets?
What's Ahead, 2000-2010
by John Kamin, Editor
The Forecaster
Dr.
Alan Greenspan, head of the Federal Reserve Board, complained about low
savings rates in the USA, as do other government officials. It is true that
Americans do not put as much percent of income in the bank as citizens in
a number of other countries, raw statistics show. But it is also true that
Americans have other ways of saving that are of limited availability to
savers in other nations; savings that simply do not show up in the stats.
Parts
of the low savings rate is caused by those who push down interest rates
for various political and economic reasons. Simply put: if banks paid more
interest, savers, retirees, wage-earners would save more! Right now, savers
subsidize borrowers with low rates. Buy why should savers put their money
in a bank to earn 3% or so, while credit card companies are charging them
23% per month interest on unpaid balances?
Hidden American Savings Secrets
There
are a lot of U.S. savings that do not show up in the statistics. Here are
just a few.
1)
More than $1/2 trillion currency is in circulation. Our last count showed
a record $512 billion, most greenbacks saved domestically, that does not
show up in the savings stats: greenbacks printed; many are in circulation,
but $100 billion are squirreled away!
2)
It is estimated that more than 50% of American workers are "investing"
in the stock market. This high percent is not equaled in any other country
whatsoever. Are these not savings? But such "investments" don't
show up anywhere in the savings rates stats. Wall Street could not exist
without these "savings" by about 1/2 of adult Americans. In many
countries, such as Russia, Ukraine, Poland, China, it is very difficult,
or little-known, for average citizens, to save money in their stock market.
And even in highly-developed countries, such as France, Italy, Greece, citizens
do not put savings into the stock market anywhere near the extent that Americans
do. They'll buy cars, stereos instead.
3)
Some 57% of American families are homeowners. You save up for a home, then
you use up the savings to buy the home, or to make a down payment. Then,
you write a check on your checking or savings account to make each monthly
payment; part of which goes toward interest, but part of which goes toward
paying off the mortgage, saving the rent. Homeowners are saving the rent
that they would pay if they were not homeowners, correct?
Harder To Buy Homes Elsewhere?
Contrast
this with Europe and Asian nations, such as Japan, where it is very difficult
for families to buy their own home. Most rent, or live in housing projects.
In many countries they are not even allowed to buy private property, such
as Russia, and many of its former Soviet satellites. They can't buy an individual
house.
In
some countries workers can buy some property, but usually it is an apartment,
or a condo. yet, in contrast to 57% of Americans becoming homeowners, any
percent measured would be much lower elsewhere, no matter where you go.
So, Americans put their money into becoming homeowners. Again, why should
they put it in the bank at 3% interest, if they can pay off a mortgage at
7%-10% interest? Home purchases, payments, are genuine savings.
4)
Americans own more gold and silver and precious metal coins that just about
any other nation, with the possible per capita exceptions of German and
Swiss citizens. Literally millions of American Eagle gold and silver coins
are sold each year, over 95% of them to Americans. In addition, Americans
buy, by the millions, gold and silver coins of many other countries such
as Australia, China, Austria, Canada, Mexico, South Africathe list goes
on and on. Are these not savings? Hard money (gold and silver) doesn't show
up anywhere in the savings statistics, except in impenetrable form (such
as Krugerrands imported, Canadian Mapleleaf coins, etc.) Truly these gold
and silver coins and bars are savings. They are not buying Krugerrands,
Canadian Mapleleaf or Mexican 50 peso gold coins because they are scarce
and rare artworks! Contrast: in most other nations, gold ownership is sporadic
and spotty at best, e.g., Japan for many years prohibited its citizens from
owning gold coins. (When we were located near downtown LA., one-third century
ago, the Japanese tourists used to flood in and want only one thing, gold
coins, even though they couldn't speak English!). When Japan and India liberalized
their gold holding and gold import restrictions, the yellow metal flooded
in. but Americans have trusted gold and silver coinsresisted attempts to
confiscate them as best they could, and added to ownership of gold and silver
coins for decades, if not centuries! Are these not savings of the most basic
kinds?
Savings In Business
5)
In many countries in Europe and elsewhere, entrepreneurs and business newcomers
are "frozen out" from starting new businesses, or providing competitive
businesses to those already established. Many Americans have found out (as
I did) that it can be very difficult to start a business or branch in Europe
that would compete there with local businesses, when you're not a local
citizen; a foreigner in that country. Things are opening upa little. But
the monopolies, oligopolies, trade restrictions, and bureaucratic regulations
often discourage new businesses in Europe from starting up. Many established
firms don't want new competitors.
Contrast
that with the climate for entrepreneurs in the USA. New business start-ups
are welcomed, encouraged, courted, romanced, just so they will start up
and create new jobs! Chambers of Commerce here love new business start-ups.
Most USA metro areas, as well as smaller cities, will flood the entrepreneur
with literature and incentives, if they will just consider opening up a
business in their area.
Some
nations are very discriminatory.
In
Mexico, for example, Americans are not permitted to work. You cannot get
a job in Mexico without a difficult-to-impossible-to-get work permit. Most
Americans are not permitted to own more than 49% of a Mexican businessunless
they get special permits, or are married to a Mexican citizen. It's quite
the opposite in the USA, in contrast, where legal immigrants are welcomed
and encouraged to prosper.
Point
is, many entrepreneurs and business start-ups and owners in the USA are
saving when they pour the risk money into their businesses. In USA, 23 million
small businesses create 2 out of 3 new jobs; represent 96% of all U.S. exporters;
account for 51% of private sector output; provide 55% of innovations. Yet,
business savings do not show up anywhere in the savings stats, even though
such start-ups in other countries compared elsewhere would not be possible.
Are small businesses and start-ups not a form of savings?
6)
Social Security Savings. Many countries compared on the savings stats have
very limited or no effective system comparable to USA Social Security. Yet,
in the USA, the self-employed, by law, pay 15.3% Social Security payments
to government into their Social Security savings account, to be used for
later retirement. Among wage earners and job creators, 7.65% is deducted
from the worker's pay check and another 7.65% is paid by employers into
the Social Security account of the individuals for "credit." It
takes some 40 quarters of credit to qualify for Social Security at retirement
age, among other things.
Is
not this 15.3% mandatory deduction a form of savings in an incomparable
Social Security system? Pay-ins are now creating a surplus of some $100
billion per year, for this nation's Social Security system. These monies
are used to balance the USA budget. But are Social Security deductions not
a form of forced mandatory savings upon the self-employed, the wage earners,
employers? I think they are, especially when compared to countries in Latin
America, Asia or Eastern Europe where the government social security systems
are inadequate, limited or even non-existent.
Tax-Sheltered Savings Plans
7)
Private Retirement Plans. Many businesses, practices, associations, have
started private retirement plans for their members. These range from IRAs,
Roth IRAs, Keogh plans, pension plans, profit sharing plans, 401Ks, medical
savings accounts, Chapter S corporations, and a whole bunch of other legal
devices that purely resemble savings, if they are not actual savings. I
suggest a closer analysis of many of these "hidden savings plans"
would demonstrate that they indeed are savings by Americans, though most
do not show up in the strict bank savings statistics, in comparisons with
other countries, where savings may be less sophisticated.
Summary: Americans are saving many ways that do not show
up in the savings comparison statistics. And the smarter citizens become,
the more sophisticated they get, the more choices they have, the more they
save!
No
contest: Americans are indeed interested in making their money grow, paying
less interest on credit cards, mortgages, personal loansso they save, and
pay these obligations off. Americans are among the greatest array of homeowners
and market investors the world has ever seen. They also buy more insurance
and annuities and other savings devices, own more different types of retirement
plans, than any other nation.
Therefore,
it is simply incorrect to imply that Americans have a low savings rate.
Instead, many or most Americans have found more sophisticated ways to save,
to pile up their money for retirement, to avoid puny bank interest paid
to them, and sidestep excessive interest charged to them. Americans are
growing more and more interested in putting away gold and silver coins.
Especially silver in 1999! This trend is recognized by the U.S. Mint itself,
which will indeed market 4 different kinds of new proof sets, some of them
silver. The Mint will market more gold and silver American Eagles in the
future, Dolly Madison commemorative silver dollars, proof and bullion precious
metal coins. The Bureau of Engraving & Printing will print more money,
and the Federal Reserve will circulate it, new designs of greenbacks, in
record amounts, as the year 2000 A.D. approaches.
When
all is measured in the aggregate, Americans are the biggest savers, the
most affluent savers in the world! If not, why would so many nations be
so eager to invade our markets, and sell everything to USA buyers? Because
they've go the bucks to buy, including savings.
Prediction:
Even more new ways to save will
be invented in the coming decade, 2000-2010, ways that are barely on the
drawing boards right now. Included will be new government proposals to boost
savings, taxes deferred. Merely measuring bank accounts and related savings
in 1999 is simply inadequate for a true picture.
Editor's Note: John Kamin is editor of The Forecaster, an economic
newsletter, 19623 Ventura Blvd., Tarzana, CA 91356, 1 year, 40 issues, $150.
Kamin's predictions on gold and silver coins, real estate, currencies, personal
finance and the economy are the foundation of the now 37-year-old publication,
aptly titled and drawing high praise from his subscribers and others in
the industry over the years.
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