In Giant Misdirection, Americans Save More While Their Real Wealth Declines Faster
by Bill Sardi
Recently by Bill Sardi: Why Hasn't the Day of Financial Armageddon Occurred Yet?
What a time for Americans to begin replenishing their savings accounts, at the exact time when they are likely to be penalized for doing so.
For the past 30 years Americans have been saving less and less money and only with the recent economic downturn beginning in 2008 did Americans begin to re-stock their savings accounts. The American consumer economy has benefited as Americans chose to spend rather than save.
But suddenly, savings are on the way up again, up to 4% in December 2011 from 3.5% in November, the highest savings rate increase in five months.
A dramatic upsurge in savings was made possible by a $61.3 billion increase in total personal income in December compared to just $7.4 billion in November. Americans chose to save a great deal of that money rather than spend it.
But the Federal Reserve Bank has just re-launched another round of cheap-money, which is what triggered the economical bubble that burst in 2008, with assurance that interest rates banks pay for money will stay at rock-bottom rates at least till 2014. While getting into debt may be easier, the yield on savings accounts (~1%) is less than the stated rate of inflation (~3%), and far less than the real rate of inflation (7-10% says ShadowStats.com) when employing 1980 and 1990 methods to determine the cost of goods and services.
Five more years of this policy will nearly halve the value of Americans' banked money, however the dollar number in their bank accounts will grow slightly, deceiving them into believing their money is growing albeit ever so slightly, because there is no comparative measure of inflation next to it.
According to one online inflation calculator which offers users the ShadowStats formula for estimating inflation, $1000 in the bank in 2010 would have lost $89.20 in value by 2011 against a 1% gain (410) in bank interest for a net loss in purchasing power of about $79.20. If that $1000 were placed in an interest-bearing account for 5 years at 1% interest it would erode in value via inflation by $437.34.
Without banks or other sources providing Americans with an estimation of the real purchasing power of their incomes, Americans will continue to be deceived into believing their money is safe in US savings accounts. In fact, if we are to believe ShadowStats, every American needs to go to their employer and demand a 7-10% annual increase in pay just to keep up with the cost of living.
