♠ Posted by Emmanuel in Cheneynomics at 3/30/2010 03:25:00 PMLicense to kill gophers by the government of the United Nations. Man, free to kill gophers at will. To kill, you must know your enemy, and in this case my enemy is a varmint. And a varmint will never quit - ever. They're like the Viet Cong - Varmint Cong. So you have to fall back on superior intelligence and superior firepower. And that's all she wrote - Carl Spackler
I usually get exasperated by the America #1-style cheerleaders' infinite faith in the enduring greatness of America despite overwhelming evidence to the contrary paraded here and elsewhere on a regular basis. Recently, however, I came across an enduring, exemplary piece of American culture that should, in the future, temper some of my enthusiasm for dumping on the States with gusto. In the original Caddyshack, Bill Murray played Carl Spackler, a groundskeeper obsessed with eliminating gophers ruining the golf course. According to the histories I've read of this cult classic, Bill Murray's now-classic lines like those above were improvised. Better yet, they were designed to elicit maximum laughter via the American sense of humour. Tossing non-sequiturs at a rapid fire pace, Murray was in top form.
It thus occurred to me that America #1-style cheerleaders are using deadpan humour in that inimitable "Carl Spackler" style to entertain, not to inform us. Everyone's a comedian. Today, for our amusement, let us consider that chestnut, "deficits don't matter because US household savings rates are on the rise." Before you start rolling on the floor laughing, let's begin with the FT's take on the matter given the most recent report on personal consumption expenditures:
With consumption outpacing income growth, the US savings rate fell to 3.1 per cent, its lowest level since October 2008...Paul Dales, US economist at Capital Economics, said that while the signs of renewed demand were encouraging, it remained a concern that consumers were dipping more heavily into their savings rather than using fresh income.There hasn't been much of a rebound in US household savings at all to fund the deficit, somewhat wild claims to the contrary. With stagnant wages, whatever increases there have been are attributable to government largesse. Which, of course, aren't really savings in the overall scheme of things as government dissavings, scheduled to hit $1.4 trillion or more this year, more than offset (marginal) private savings.
With these statistics in mind, let's hand out the inaugural Carl Spackler Award for US Household Saving Analysis to the ever-optimistic yet factually challenged Michael "Deficit Attention Disorder" Pettis. For the life of me, I cannot understand why this guy has so many followers when he hasn't really come across a "deficits don't matter"-style story he didn't like. He's a nice fellow and all--the worst he's called me is "cantankerous," but I'm afraid his brand of analysis leaves much to be desired. Here he was in November of 2008--just a month after the lowest monthly savings since the most recent one was announced:
This process [of abundant liquidity being made available to US consumers] has probably stopped. Banks are no longer willing to make consumer loans, and with stock and real estate markets down so dramatically, the US household savings rate will almost certainly rise.Those double-digit savings are really great in the deadpan humour department and everything (cue Carl Spackler: "He's on his final hole. He's about 455 yards away, he's gonna hit about a 2 iron I think"), but it seems America is no better off in the savings department when Pettis tried to info--I mean, entertain us back in November 2008 with tales of frugal America. So, congratulations to Michael Pettis for winning what I am sure will become a most coveted award as I hand out more of these prizes. Really, there are so many spouting Cheneynomic rhetoric that our amusement is multiplied a jillionfold.
By how much? With households seeing their home and equity savings decline so dramatically I think one can easily argue that we will probably go above or at least to the higher end of the “normal” range of 6-10% of GDP, but even if we assume that households will only go back to the middle of the range, that still implies an annual adjustment of at least 5% of US GDP [my emphasis].
Next up is an IPE stalwart, Joseph Nye, Jr. Recently, I featured an op-ed of his in the Korea Times that makes a similarly fantastic claim about rising US savings:
But, as America's savings rate begins to rise, China's export-led growth model, which has promoted employment in China at the cost of global trade imbalances, may no longer be possible.Hold. It. Right. There. What rise in savings is there to speak of? Household savings have gone, well, nowhere (cue Carl Spackler: "In the immortal words of Jean Paul Sartre, 'Au revoir, gopher'"!) Meanwhile, the US government is dissaving to the tune of a trillion and a half dollars a year. As for corporate savings, well, first you have to make profits before you retain earnings. With entire US industries on life support--housing, airlines, banks, automakers, etc.--it will not surprise you that there is so little to speak of. So, another well-deserved prize for Dr. Nye.
While I crack jokes now and again, the honest, unvarnished truths are these:
- Demographic trends Pettis so loves are against American savings as retirement beckons for the baby boomer generation. Retirement means further government dissaving coupled with drawing down whatever negligible personal savings an aging generation has left;
- There is no wage growth to speak of from which to save from;
- Americans are inveterate shopaholics whose credit-heavy environment exacerbates genotypical factors discouraging financial planning;
- Instead of armchair theorizing, it sometimes helps to look at the numbers your own government puts out once in a while.