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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 408.76+2.6%Jan 5 4:00 PM EST
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To: THE ANT who wrote (76983)8/2/2011 2:38:55 AM
From: Hawkmoon1 Recommendation   of 219022
 
This is why I disagreed when Americans had zero saving and some argued that Americans increase in housing wealth was the same as saving<.i>

It's only saving if the house increases in value above and beyond the interest expense. Same with any other equity or commodity that is purchased on credit.

If cash is paid for the above items, it can only be construed as savings if the assets appreciate in value above the cost paid.

We have to remember that when we deposit cash in the bank, we're actually making a loan to the bank, in return for interest payments (little that they may be now) with the expectation that the loaned money is guaranteed by the FDIC. The banks then lend that money out to others at a higher interest rate and the spread is their profit.

Right now people are saving like crazy, loaning money to banks at less than 1% and the banks are then lending it back to the Government in the form of T-Bills, which the taxpayers (depositors) are paying the interest on. It really creates no economic activity. Bank lending MUST be made to private borrowers, who then (hopefully) achieve wealth creation that is greater than their cost of funds from the money they borrowed.

Bottom line. Anything that holds or appreciates in, value can be construed as savings. The difference primarily lies in the liquidity of that asset to be converted into cash, or tradeable good/service.

Hawk
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