The saving rate in US is 5%. In India it is 32%. In China it is roughly 30%. Unfortunately the flip of savings in US will not happen tommorrow. I dont see it ever happening until there is some real pain to the consumers. Right now the US consumer has not felt the pain. They have only lost their jobs but govt continue to showe their benefits on the jobless instead of kicking them in the back and asking them work harder for their bread.

BRIC countries have life style of savings bred from centuries of difficulties. Even if there is some short term variations in savings rate US will always be less than 10%. Also US per capita Income is going to slide in teh coming few years which will further hit capital formation in banks. Already you are seeing teh failure of small FDIC banks. MARK MY WORDS. YOU WILL SEE A REPEAT OF THE SAVINGS AND LOANS CRISIS AT A MUCH LARGER LEVEL.
So if you are dreaming of US consumer pulling the country out of its spineless moronic policy of quantitative easing, let me clear that fog out for you.

You dont have to wait much longer anyways. Negotiations with the chinese are anyways not going well so we will see break down of the US currency system before year end. Then I want to see where spoilt US consumer will be to lend to the treasury.

1800 Banks to fail
FED going bankrupt

Fresbee
Investing Contrarian

Thanks,

Ron

Excuse me? If this is what you are saying, you need to explain your math.

Here is mine…

The federal fiscal deficit this year is projected to be $1.8 trillion (2009). The total government debt (the cumulative effect of annual deficits) is projected to hit $12.9 trillion this year (whitehouse.gov estimate). This means that it’s just not this year’s deficit that needs financing, its the whole debt.

This year’s estimated personal savings rate for the US = $403 billion (annualized Q109 – Source BEA). Clearly, even if all the personal savings of every American when towards financing this year’s deficit, there is a shortfall of more than $1.2 trillion. And what about the debt?

Total on deposit of all 8200+ FDIC-insured US Banks (Q1-09) = $13.4 trillion. In other words, just to finance US federal government debt would require nearly every dollar currently on deposit in US banks.

Then there is total credit market debt which including the total federal government budget deficit equaled $52.9 trillion in Q1-09. (This has grown 35% faster than the GDP since 2000 and now represents 375% of total annual US GDP).

Now add future unfunded liabilities to the equation which is another $59 trillion. (usdebtclock.org)

(Let’s put aside for a moment that future liabilities aren’t due today).. Here are the totals per US household (115 million). Oh, and there is also the interest on the debt (let’s assume 3.5% per year which is the approx. 10-year T bill yield which works out to an additional $450 billion/year)….

To put these numbers in perspective, this is what it works out per US household.

TCMD of $53 trillion = $461,000 per household.

Medicare, Social Security liabilities $59 T = $513,000/household.

Grand total per household = $974,000.

So please explain to me how the US can finance its own current debt and how will be finance our future liabilities without help from foreigners?

And while you’re at it could you also explain who will fill the $1 trillion gap that foreigners have invested in US Treasuries in the last 18 months as Net Treasury international capital flows reverse? (See Chart 2 at http://tradesystemguru.com/content/view/286/58/)

Matt Blackman
Host TradeSystemGuru.com