Monday, March 06, 2006

Savings? We don't need no stinkin' savings.......

In a fairly powder puff piece last week USA Today took a look at the US Savings rate from 50,000 feet up. It's not pretty to my eyes, but some still see the negative savings rate as posing little risk.

"There is enough saving in the world to provide the capital," says John Rutledge of Rutledge Capital.

Fully 80% of mortgage refinancings last year were "cash out." That means borrowers refinanced to a larger loan balance to get their hands on some cash to spend.

Last year, consumers pulled a mammoth $243 billion from their home equity.

That's nearly $1,000 per man, woman and child in the US. If this pool of excess capital (which was mostly spent) suddenly dwindles - as evidence seems to suggest that it will fall sharply in 2006 - the consumer-driven portion of the US economy could come to a grinding halt.

The article ends with a quote for the ages - "We want to be richer," Wyss says.


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