What’s the effect of the global financial mess?
Having some spare time in the house with the slightly crappy weather, I’ve been watching some of the TED talks that have been sat on the iPod waiting patiently for me.
One in particular was from John Gerzema, talking about the ‘post crisis consumer‘. Beyond some of the academic/economic waffle, and the ‘America is the world perspective’ it did contain some interesting observations.
First off is the (US) savings rate over the last 70 odd years from 1935 to 2005 (sorry the graphics are a little fuzzy), giving us confirmation that it’s in the last few years that average households have negative savings – i.e. no savings and money oweing on credit, while since the 1950′s it’s been in the 5-10% band
The blip in the early 1940′s is of course the war. But only because there was nothing to buy, rather than a patriotic drive to save money into war bonds as there was in the UK. It is interesting though, even when there were almost no consumer goods to buy, savings rates only averaged 20-25%.
Anyhow, while these numbers are now four years old it begs the question – ‘What are people doing now?’. Well the (startling) observation is that people are paying off debt. Because they don’t want to be beholden to the banks as much anymore. Which is good news. And more people are using debit cards to access money in their bank accounts, rather than using credit cards and borrowing the money. Again good news.
Of course, neither the banks or the credit card companies are happy with this – since they don’t get to bleed us all dry with interest rates and charges. But still, they’re not hurting yet and it’s early days in the whole economic recovery thing.
More interesting was the information about how people are dealing with the stress. While it doesn’t say what the sample population was here (Wall St executives still in jobs, as opposed to homeless families in some Detroit ghetto), and the percentages are more than 100%, so people are obviously doing a number of things, it does make interesting reading;
5% of people are dealing with the stress by buying more stuff. This is taken as a good sign, as we’re getting more savvy about what we buy, and we aint’ buying any old crap the marketing people want us to buy.
Still, draw your own conclusions. Good news for Nintendo, where people are playing video games and exercising (Wii), possibly with their family. Really good news for ISP’s and TV broadcasters.
Related posts:
- Avalon’s Money Thread: Working out our net worth.
- Why are Credit Cards still charging such high interest rates in New Zealand?
- What Planet do economists live on?
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What's the effect of the global financial mess? : Avalon's Blog Economic Finance news on
Mon, 4th Jan 2010 7:13 am
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Mon, 4th Jan 2010 9:12 am
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