A
key sign of financial health is savings; if one does not have a decent
amount of money tucked away for a rainy day, it is a sign that all is
not well. Americans have a very hard time sticking to a budget and
saving, compared to their Asian counterparts. This is reflected in the
startling revelation that over 62% of Americans do not even have $1000
in their savings account. Foreigners are shocked when they find out
that Americans have so little money saved for a rainy day.
“It’s
worrisome that such a large percentage of Americans have so little set
aside in a savings account,” said Cameron Huddleston, a personal
finance expert and columnist for GOBankingRates. “It suggests that they
likely don’t have cash reserves to cover an emergency and will have to
rely on credit, friends, and family, or even their retirement accounts
to cover unexpected expenses.”
If
62% don’t have $1000 or more what will they do if someone misfortune
should strike? Hope that some Good Samaritan throws money on their
laps. Many Americans are having a hard time but if one examines some of
the things the typical American family purchases one will note that
there are many items that would fall into the category of
non-essential’s.
Spending
money you don’t have on junk you don’t need to impress people you don’t
even like is a perfect recipe for disaster. Americans have never
learned to live within their means and with the economy in disarray they
should be living one to two levels below their means. In general
putting money into a savings account amounts to folly, as the current
set up (due to ultra-low interest rates) favours speculators, but a
small portion of those funds you save should put away as something to
fall back. In that sense, not having $1000 to fall back on is a real
tragedy.
The
situation in China, on the other hand, is quite different; in one of
our recent articles of which an excerpt is posted below, we illustrated
how many of the Middle-Class Chinese have $50,000 or more in savings.
According
to Credit Suisse109 million, Chinese have savings network that ranges
from $50,000 to $500,000. The momentum gained traction in 2000; since
that time, China’s Middle Class has grown at twice the U.S rate. To
avoid changes such as unemployment, Credit Suisse, measured wealth
rather than income. Hence, these numbers are quite shocking; when you
consider that the average worker in the U.S does not even have $5,000 in
savings. Makes you wonder if we deserve the superpower designation
China
accounts for a fifth of the World Population but accounts for 10% of
the Global Wealth. In the years to come the pace will continue to
increase, eventually propelling China to the number one place. China has
the World’s second most Millionaires and is creating them at a faster
rate than the U.S. Currently, China has more than one million
millionaires. However, China now has the most billionaires In the World,
and this means it’s just a matter of time before they have the most
millionaires too. Full Story
Conclusion
This
economic recovery as we have stated so many times over the past few
years is illusory in nature; the main driving force behind this economic
recovery is hot money. The Fed has decided to try something new;
maintain ultra low-interest rates for an indefinite period and in doing
so force corporations and individuals to speculate. Hence the record
sums of cash deployed into share buybacks over the past six
years. Eventually, the US will be forced to embrace the negative
rate bandwagon, and this will foster even more
speculation. Translation, the Fed is not going to raise rates; in fact,
they are probably getting ready to lower them. Negative rates will
create a new trend in speculation, probably the likes of which we have
not seen for a very long time. All those individuals who have sat on the
sideline cursing this bull market, will eventually be forced to embrace
it as speculation will be the only avenue left to preserve one’s
wealth. Hence, every strong pullback has to be viewed through a bullish lens.
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