From USA Today of 24 Jan 2024:
The average American household has $62,410 in savings, per the Federal Reserve.
However, the median American household has just $8,000.
Note: The Fed link shows "transaction accounts" by default, not savings. But it looks like that site would be useful, if I could figure it out. For now, I'm just going with the quote from USA Today.
According to one account, Herbert Hoover, when queried a short time after he left office if there was anything he should have done while President that he had not done, replied: "Repudiate all debts."From Franklin D. Roosevelt and the New Deal, 1932-1940 by William E. Leuchtenburg
I have to begin by saying that demand-pull inflation encourages economic growth, and cost-push inflation causes growth to slow. But by the time I get the thought out, half the internet is hollering THERE'S NO SUCH THING AS COST-PUSH INFLATION and the other half didn't hear me, doesn't believe me, or just doesn't care. For or against, then, they all go back to preparing for the next insurrection.
If we could just fix the damn economy we wouldn't need insurrections. But no one stops to think about that.
Let me say it again: cost-push slows the economy. It means we get less income per dollar's worth of effort.
Now, maybe it is true there is no such thing as cost-push inflation, because we only get inflation if they print too much money. But here's the thing: It isn't the inflation that slows the economy, it's the cost-push. It's cost pressure that slows the economy. If policy prevents the inflation but fails to relieve the cost pressure, the economy slows anyway.
If policy prevents inflation but doesn't relieve the cost pressure, the economy slows
anyway.
Maybe the cost pressure first arose with financialization in the 1980s and 1990s. Maybe it first arose during the Great Inflation of the 1960s and 70s. Maybe it first arose in the 1950s, or even before. The point is that the cost pressure has been a problem for a long time, and economic growth has been slowing all the while.
Economic growth has been slowing all the while.
Paul Volcker quashed inflation in the early 1980s, and we thought he had solved the problem. But the cost pressure problem was not solved. Then, in 2012, the Federal Reserve adopted something called the two-percent target. Now that sounds innocent enough, until you realize it means their goal is to have two percent inflation every year.
The standard story is that Volcker quashed inflation. The fact is that the Federal Reserve tried for 30 years, and then gave up on quashing inflation.
Hey, two percent inflation isn't bad, I'll give you that.
But two percent isn't zero. Two percent inflation is not stable prices.
It is rising prices. It is inflation. Economists call it "stable inflation." I call it hypocrisy.
They gave up on quashing inflation. At the end of 1982 the CPI
was 97.7. At the end of 2012 it was 231.2. At the end of 2023 it was
308.9. Prices have more than tripled since Volcker quashed inflation.
And because of cost pressure, the economy has been slowing all the
while.
As for myself, I would prefer to fix the economy. All we have to do is solve the cost-pressure problem. To me, that's an easy thing to do. The problematic cost is the cost of finance. We have to reduce the cost of finance. We have to reduce the bills.
Let me say it a different way: We need faster income growth, faster GDP growth, faster job growth, and better jobs. But none of that will solve the problem unless we reduce the growth of financial cost.
That's the whole plan, in a nutshell.
Let's say we make it economic policy to cut the growth of household debt in half. It has to be policy or the plan won't work, because under existing policy the increase in household debt gets bigger almost every year. It has to be policy, and the new policy has to reduce the growth of household debt.
The easiest way to do this is to make it policy to increase employee compensation by a comparable amount. For every extra dollar of income we get, policy encourages us to borrow a dollar less. So our spending can stay about the same, our debt increases more slowly, and we have smaller finance charges to pay. And that is how the plan works.
As
you may notice, the new policy I propose is just the opposite of
existing policy. Existing policy provides funds by expanding credit and fights inflation by restricting the quantity of money. The proposed
new policy accepts the view that the quantity of money should grow along
with output, that borrowing money should be minimized to reduce financial
cost in our economy, and that the proper way to fight inflation
is by restricting the growth of credit rather than the growth of money.
Our existing policy has been around for a long time. In the early days after World War Two it worked well. Back then it worked because we didn't have a lot of debt and our financial costs were low. The old policy worked so well that economists and policymakers stuck with it, forever encouraging us to use more credit. That was the mistake.
The existing policy didn't treat debt as a problem, because in the early days we had little debt and it wasn't a problem. Things are different now. These days, we can't afford to live. It is time for policy to stop encouraging credit-use at every turn. It is time for policymakers to admit that we now need less reliance on credit and more reliance on the dollar -- more reliance on income.
There was a time when encouraging the use of credit was good policy. This is no longer that time. This is the time to discourage the use of credit and to encourage the growth of income.
If you step back and look at this picture of the economy you will notice that if we adopt the new policy and it works, and we stick with it, then a day will come when we have too much money and not enough use of credit. We will eventually be tempted to abandon the policy that here is called "new" and to go back to the policy that here is called "existing". That is not the best solution.
The best solution is to
seek the point of optimum balance between money and the use of credit.
The point of optimum balance gives the best economic growth. It is
tricky, because continually increasing the reliance of credit will cause
our economy to grow until we are far beyond the point of optimum
balance. That is what gets us into trouble, as it did in 2008. What we
need is to find the point of optimum balance between money and credit,
and stay there, so that our economy can perform well over the long haul.
It can be done. We just need the right plan.
Let
reducing government debt be third on our to-do list, not first on that
list. After excessive private-sector debt comes down some -- after
business and household debt come down --it will be easier to reduce
government debt. Oh, and notice the word help in the graph title there.
Happy Holidays. Merry Christmas.
Peace.
Going with debt relative to income, I'll compare household debt to "disposable" personal income (DPI), the measure of "after tax" income.
In FRED's Table 2.1. Personal Income and Its Disposition: Annual they subtract "personal current taxes" from "personal income" to get "disposable personal income". Then, from disposable personal income they subtract three categories of cost
and what's left is called "personal saving".
Hey, I'm just making sure it makes sense to subtract household interest cost from DPI. Where else?
Funny you should ask. Because "Personal interest payments" is half or less than half the interest that is paid by households:
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| Graph #1: "Personal Interest Payments" as a Percent of the Monetary Interest Paid by Households |
Why? They have their reasons. Apparently the rest of the interest is counted as business expense. According to the CHAPTER 12: RENTAL INCOME OF PERSONS PDF,
The housing stock provides a flow of housing services that are consumed by persons who rent their housing and by persons who own the housing they occupy (referred to as “owner-occupiers”). In the NIPAs, owner-occupiers are treated as owning unincorporated enterprises that provide housing services to themselves in the form of the rental value of their dwellings.
Chapter 12 continues:
Thus, personal consumption expenditures (PCE) for housing services includes both the monetary rents paid by tenants and an imputed rental value for owner-occupied dwellings (measured as the income the homeowner could have received if the house had been rented to a tenant)...
So the "Personal consumption expenditures", which is counted in GDP, includes the cost of an imaginary monetary rent that homeowners (called "owner-occupiers") pay to live in their own homes. Conveniently, this cost is offset by imaginary income:
... and rental income of persons includes the monetary income earned by landlords and an imputed rental income earned by owner-occupiers.
Apparently, this imaginary rental income is counted as an addition to homeowners' income, offsetting the imaginary cost of paying the rent. This imagining allows "owner-occupied" houses to be "treated as fixed assets" for accounting purposes, just as "tenant-occupied" houses are.
In a paper on modeling imputed rent, Arnold J. Katz points out that "The rental value of owner‐occupied housing ... accounts for about 8 percent of GDP". Katz is right. Unbelievably, in 2022, imputed rent added two trillion dollars to GDP.
Oh, they have their reasons.
5:31 AM Fri, 10/15/2021
She's getting old, and she knows it. Me too, I'm getting old and I know it, so I have sympathy for her.
Perhaps
I should say, I'm retired a few years now. Retiring simplified my life
and made the dogs a bigger part of it. They get a lot of my time.
When I bring her a treat her eyes are on me, not the treat. Until I'm arms-length away from her, her eyes are on my eyes. (Our other dogs look only at the treat.)
For the past couple months, her back leg
troubles her. She has a bit of a limp. It varies, some days worse than
others. Finally it occurred to me to stop the roughhousing. I keep an
eye on our (hundred-pound) puppy so he doesn't jump on her. Actually, he
caught on quickly. He knows, too, that she is getting old.
Yesterday I noticed some blood by her butt. Oh, that can't be good.
6:36 AM Fri, 10/15/2021
Sometimes, she wants something. "What do you want?" I ask. She licks her lips: A treat, Daddy. I want a treat.
I love it that she talks to me like that.
1:37 AM Sat, 10/16/2021
All the dogs I ever had, had dark brown eyes. Except Mish. Hers are very light brown, almost golden.
28 Oct
She loves to "hold hands" -- to wrap her front leg around my forearm while I'm petting her with the other hand.
And I've been watching her eyes: She definitely watches my eyes when I bring her a treat, till I'm within arm's length of her.
3 Nov 2021
When I take her paw in my hand, it's a handful. But she does prefer wrapping forearms.
4 Nov 2021
Yesterday I let our three dogs out and (later) in again, around lunchtime. I was in a good mood and gave them each a "chicken stick" treat.
Today, just now, just before noon, I let them in. They all looked at me expectantly. Mish looked at me and licked her lips: A treat, Daddy. I want a treat.
What a personality that dog has!
10 Nov 2021
I was sitting on the couch. Mish was on the couch, lying down, her front paws out in front of her. I put my hand gently on her paws. She pulled one paw out and put it on top of my hand.
Her butt is improved, by the way. No more blood.
She has a lot of good days, too, with that achy hind leg. The MSM helps, and the Dasuquin. And for a while we stopped the roughhousing that (I think) was the original source of the ache. Gave her time to heal up. I still interrupt them when they roughhouse, but not immediately.
3:23 PM 1 Dec 2021 // Dad's birthday. Happy Birthday, Dad!
Garbage day. Time for my weekly-if-I-remember start-the-garden-tractor-and-let-it-run. Took the dogs out with me, two birds one stone.
After about 15 minutes Mish came to get me -- came up within 5ft of the noisy tractor to get my attention. I could see the other two by the house. Probably want to go in, I figured. Hopped off the tractor & walked toward the house. Mish stayed right with me.
As I got close to the house, Max and Lexi walked up to the door, definitely ready to go in. I opened the door and as they went in, I turned to look at Mish. She looked at me as if to say "No, I'm not ready yet" and walked away.
That's my Mish.
5:14 AM 15 Jan 2022
I love it when she looks me in the eye as I bring her a treat. She loves me more than she loves the treat!
Lately, I have Mish on a leash every time she goes out. To prevent the running and roughhousing. We seem to have it down to a schedule. Every two hours Max (the puppy) is ready to go out again. So the four of us go out, Max and Lexi and Mish and me, with Mish and me leashed together. 20 minutes, give or take. Retirement creates time for such things.
Every two hours, 6 AM to 6 PM, but perhaps we can skip one around noon.
//
7:52 PM Fri Aug 12 2022
Around 3:30 this afternoon, I figured it was time to watch a little TV. Found season one of Brokenwood, set the volume right, and settled down into the sofa.
Mish barked, that urgent bark that means I-need-your-attention-pronto. I mumbled to myself and settled deeper into the sofa. A minute later, the urgent bark came a second time.
I got up. When I got close enough to see her, she looked me right in the eye and licked her lips three times: "I'M GETTING PRETTY HUNGRY NOW"
The nerve of that dog! I laughed and went back to the couch. Not five minutes later, the third urgent bark. I shut off the TV and made their dinner.
//
Later, about 20 minutes ago, 7:30 PM, the dogs are quiet, settled-in for the night. I decide to have a glass of wine.
I grab the glass, grab the bottle, pour the wine, you know the steps.
Before I get to step four (put the wine away) Mish hobbles into the kitchen as if to say "I'm ready for wine-on-the-porch". I couldn't feign misunderstanding. We had to go out.
She does love her time outside.
/////
11 December 2023
Today, my girl Mish died, a victim of the cancer. We found out seven months ago. The vet gave her three months. She lasted seven.
She was fine on Saturday. Sunday she woke up in pain so bad she could hardly move. Monday, today, we took her to the vet and had her put to sleep.
You spend your whole life developing a trust relationship with your dog. And the last thing you do for her is lie and say the vet is going to help you sleep better now. It was as close as I could come to not lying. But not close enough.
She was the prettiest, smartest, most human dog I ever knew.
.jpg) |
| Mish |
The blue line on the graph shows household debt service since 1980. The red line is my estimate of household debt service going back to 1946:
 |
| Graph #1: Household Debt Service since 1980 (blue) and my estimate back to 1946 (red) |
My estimate is based on 4.6% of outstanding household debt being repaid each year. Less than 5%. Evidently the actual (blue) percentage varies some from year to year: When the blue line is higher than the red, we are repaying more than 4.6% of our outstanding debt; when the blue line is lower than the red, we are repaying less than 4.6%.
The red line
starts in 1946 at almost exactly two percent. So, in 1946, my parents
probably used about 2% of their disposable (after-tax) income to pay
down their outstanding debt. The red line shows that by 1956 they were
probably using more than 5% of their income each year to pay down less
than 5% of their debt. And by 1965, when I turned 16, my folks may have
been using almost 7.5% of their income for the debt service payment -- while still repaying less than 5% of their debt.
On average, by my estimate, each year people were paying down less than 5% of their existing debt. But by 1956, on average, people were using more than 5% of their disposable income to make the payment. Perhaps we should say that by 1956 people were already "under water" on their financial obligations. By 1956.
