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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Win-Lose-Draw who wrote (161198)4/21/2002 12:44:20 PM
From: GraceZ  Read Replies (2) of 436258
 
Median is extremely inaccurate as well.

I would say that virtually any measure of savings used informally by the media or formally by the government sources is highly inaccurate as well. The reason being that there is no agreement as to what constitutes "savings". Think about it. The strictest measure is the difference between income and expenditures. This is how the national savings rate is computed. So while someone who puts their money in a passbook and gets 3% return on it is considered a saver, someone who takes that same amount and invests it for a 300% return has consumed their savings. It reappears if you sell the asset and put it in the bank under the savings aggregates the Fed uses to track money....but it still doesn't show up in the national savings rate because they only count the aggregate difference between income and expenditures and do not include capital gains or re-invested dividends or unrealized cap gains from investments except dividends paid to you as income. Is this getting silly enough for you yet?

Just use myself as an example. My husband had no pension plan for years so he bought rental properties. He bought these properties with cash he saved and mortgages. As soon as he bought a property, even though they had equity levels of 1/3 the value of the house. The "savings" he used were immediately taken out of any savings measurement. Meanwhile that original investment has an unrealized gain of 300% over a 10 year period (even when one accounts for the disposel cost of the asset), but this money is not measured in any monetary aggregate. That original amount of money disappeared from savings according to official sources. Now if he'd placed the money in a 5% CD instead and had it doubled in 14 years it would still be considered savings. Meanwhile the net worth marches up and we are considered spenders not savers!

Same with stocks, I put 25% of my income into a retirement plan for 13 years or so (you can do this if you have both a pension and profit sharing plan) and invested this money in the market. They counted that money when it went in but they never counted the money that the money made not even when the yearly return from the investment surpassed my yearly gross income. How silly is that?

Two years ago the media was all concerned that the wealth effect was wreaking havoc.....now we are a nation of paupers who will never be able to retire about to take down the world with our borrowing and consumption. At some point you have to see the media for what they are, a bunch of clowns who only cover things in the most superficial biased way.
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